Taiwan Semiconductor Manufacturing Company (NYSE:TSM) is seriously considering increasing its production fees for artificial intelligence leader Nvidia (NASDAQ:NVDA) , according to a report by Morgan Stanley.Nvidia CEO Jensen Huang apparently agrees with the notion.
“TSMC's wafer price is indeed too low,” said Huang at a Computex investor luncheon in Taipei on Wednesday.”I think TSMC's [service] price is too low,” and that “TSMC’s contribution to the world and the tech industry is under-presented by its financial results,” he added.”NVIDIA is TSMC’s key customer and accounts for 10% of TSMC’s 2024 revenue, we estimate,” said Morgan Stanley analyst Charlie Chan and others in a note. “We believe that if NVIDIA accepted price hikes, other key AI semi customers may follow.”
“We think NVIDIA's management recognizes TSMC’s reliability, as it helps remove one of the largest risk factors – foundry production,” Chan added.NVIDIA did not confirm the timing or amount of a wafer price increase.TSMC hiked its prices by 10% in 2022 and another 5% in 2023. Morgan Stanley believes TSMC could raise prices by another 5% for 2025, due to AI semi demand.
Other major TSMC customers include Apple (AAPL), Advanced Micro Devices (AMD), Broadcom (AVGO), Qualcomm (QCOM) and MediaTek (OTCPK:2454-TK).”We believe TSMC will be a winner in AI semis in the long term,” Chan noted. “No matter where the growth is coming from – GPU or ASIC, cloud or edge AI chips – most, if not all, will likely be manufactured by TSMC's leading-edge foundry services.”Morgan Stanley rates TSMC Overweight, as most analysts are very bullish on the stock. Its price is up 55% year to date.
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