TSMC's Strong AI Outlook Signals Positive Trends for Semiconductor Industry

Buying Nvidia Stock Looks Like a No-Brainer After This Key Event | The Motley Fool

Taiwan Semiconductor Manufacturing (TSM -1.22%) released its fourth-quarter 2024 results on Jan. 16, and the semiconductor giant's results offered insight into the state of the semiconductor industry. Popularly known as TSMC, the Taiwan-based company is a semiconductor foundry that makes chips for fabless chipmakers that do not own any manufacturing facilities of their own, such as Nvidia (NVDA -3.12%), along with consumer electronics companies. TSMC points out that it served 522 customers last year, manufacturing almost 12,000 products across multiple categories such as smartphones, personal computers (PCs), data centers, automotive applications, and the Internet of Things (IoT). Last quarter, its revenue increased 37% year over year to $26.9 billion, and management served up terrific guidance for Q1 2025 that calls for top-line growth of 34% to $25.4 billion (at the midpoint). For the full year, TSMC expects its 2025 revenue to increase in the mid-20% range. All of that suggests demand for the chips the company manufactures is set to remain healthy, which is encouraging news for Nvidia shareholders too. Nvidia is among TSMC's top three customers, and the artificial intelligence (AI) pioneer has faced various challenges recently, including a potential slowdown in spending on AI infrastructure, stiffer competition, and the recent restrictions imposed by the U.S. government on sales of chips to foreign countries. However, TSMC's outlook is a bullish signal that Nvidia could have another solid year in 2025. After all, TSMC is anticipating sales of AI chips to double in 2025, owing to "the strong surge in AI-related demand." That explains why the company's capital expenditures (capex) this year will range from $38 billion to $42 billion, a substantial jump over last year's outlay of $29.8 billion. Management noted that around 70% of its 2025 capex will be dedicated to the manufacture of advanced chips. These advanced chips are based on process nodes that are 7-nanometer (nm) or smaller. TSMC generated 74% of its Q4 chip revenue from sales of these advanced technologies, up from 67% in the year-ago quarter. More specifically, 60% of the company's revenue came from 3nm and 5nm chips, which is not surprising as these process nodes are being used for manufacturing AI graphics processing units (GPUs) for the likes of Nvidia. TSMC's decision to invest significantly in these advanced process nodes is a clear signal the demand for AI chips remains healthy. This also means Nvidia should be able to manufacture more AI GPUs in 2025 thanks to TSMC's higher capex. Additionally, Nvidia has reportedly been allocated 60% of TSMC's advanced chip packaging capacity this year. All of this puts Nvidia on course to fulfill more orders for its latest Blackwell chips, and the company is already seeing demand exceeding its supply. As a result, there is a strong possibility of Nvidia beating Wall Street's expectations this year. This is probably why Nvidia's revenue estimate for fiscal 2026 (which begins later this month) has moved higher once again following a dip caused by the announcement of the proposed export restrictions. Wall Street seems to have regained confidence in Nvidia's ability to support its growth streak in 2025. TSMC also remarked on the latest earnings call that any potential export restrictions should be "manageable." Despite its 171% gain last year, investors can still get their hands on Nvidia stock at a reasonable valuation -- about 30 times fiscal 2026 earnings estimates. Analysts are projecting a 51% increase in Nvidia's earnings next year to $4.45 per share, but the company may be able to beat that number based on TSMC's sunny outlook and capex spending. Nvidia also sports a price/earnings-to-growth ratio (PEG ratio) of 0.99 based on its projected earnings growth for the next five years, according to Yahoo! Finance. A PEG ratio of less than 1 typically indicates a stock is undervalued with respect to the earnings growth it can deliver. Combine that with the strong outlook from its key foundry partner, and Nvidia remains an attractive buy in 2025.

Taiwan Semiconductor Manufacturing Shares Jump on Positive AI Outlook. Is It Time to Buy the Stock?

Shares of Taiwan Semiconductor Manufacturing (TSM -1.53%), or TSMC for short, rose after the semiconductor contract manufacturer once again produced strong revenue growth and issued upbeat guidance as it continues to be an artificial intelligence (AI) beneficiary. Let's dig into TSMC's results and guidance to determine if now is a good time to buy the stock. An AI winner TSMC's revenue growth accelerated in the fourth quarter, with revenue climbing 37% to $26.9 billion, compared to 36% growth the quarter before. Its earnings per American depositary receipt (ADR), meanwhile, soared 56% to $2.24 from $1.44 a year earlier. Both numbers came in solidly ahead of analyst consensus estimates. AI chips once again helped power TSMC's results, with high-performance computing (HPC) accounting for 53% of its revenue in the quarter. HPC revenue climbed 19% sequentially. A year ago, the segment accounted for 43% of its revenue. Smartphone chip sales rose 17% quarter over quarter and represented 35% of its overall revenue. A year ago, smartphone revenue was 43% of total revenue. The company continues to see its advanced technologies grow, with nodes 7 nanometers (nm) and under accounting for 74% of its revenue, up from 69% in Q3 and 67% a year ago. Three nanometer technology accounted for 26% of total wafer revenue, which was a big jump from 20% last quarter and 15% a year ago. TSMC once again continued to see nice gross margin expansion, as it has benefited from pricing power and high capacity utilization. This is despite TSMC still seeing some margin compression due to scaling up its newer 3nm technology. Newer technologies initially have lower margins until they reach scale. Overall, its gross margin expanded by 600 basis points year over year and 120 basis points sequentially to 59%. The higher its gross margin, the more revenue drops to the bottom line. As such, when gross margin improves, this helps profits grow more quickly than revenue. The company forecast first-quarter revenue to come in between $25 billion and $25.8 billion. That would represent about 35% year-over-year growth at the midpoint of its guidance range. It projected its gross margin to be between 57% and 59% and its operating margin between 46.5% and 48.5%. It sees 2% to 3% margin compression as it ramps up some of its newer overseas foundries. TSMC is looking for full-year 2025 revenue to grow by close to mid-20% levels. It added that it expects revenue for AI accelerators to double in 2025, even though revenue from those chips tripled in 2024. After spending nearly $30 billion in capital expenditures (capex) to expand its capacity last year, the company plans to spend between $38 billion and $42 billion on capex this year. It said its first fab in Arizona has already entered high production volume in Q4, while its new Japanese foundry started production at the end of Q4. It currently has plans for two more facilities in Arizona and one in Germany as well. Is TSMC stock a buy? TSMC continues to deliver excellent revenue and profitability growth. AI chips are helping to lead the way, and the company continues to work to add capacity to meet growing AI chip demand. At the same time, its strength in 3nm and 5nm technologies has turned it into the clear leader in high-performance computing, as its competitors have struggled. This, in turn, is leading to strong pricing power and an improved gross margin. The stock now trades at a forward price-to-earnings (P/E) ratio of 24 times based on analysts' 2025 estimates and 20.5 times based of 2026 estimates. Meanwhile, it has a forward price/earnings-to-growth ratio (PEG) of under 0.7. A PEG below 1 is generally considered undervalued, while growth stocks often have PEGs higher than that level. With AI infrastructure and data center growth expected to continue to ramp up and capacity tight, TSMC continues to find itself in an enviable position. It is the go-to manufacturer for advanced chips, and with Intel's and Samsung's struggles, that does not look like it will change anytime soon. As such, even after the recent run-up following its earnings results, TSMC stock looks like a solid option to buy given its attractive valuation and the opportunity still in front of it with the AI infrastructure buildout. Best of all, it will benefit whether customers continue to favor chips like Nvidia's graphics processing units (GPUs) or turn more toward custom AI chips from the likes of Broadcom. Either way, it wins.

2 Artificial Intelligence (AI) Stocks That Could Make You a Millionaire | The Motley Fool

Artificial intelligence (AI) is expected to impact the global economy in a big way in the long run, with market research firm IDC estimating that every dollar spent on AI-related business solutions and services will generate $4.60 in the global economy in 2030. The research firm says AI spending has the potential to account for 3.5% of the global gross domestic product (GDP) in 2030. So now is a good time for investors to take a closer look at some of the top names in this sector that seem well placed to make the most of this massive opportunity. Buying and holding solid companies that can benefit from disruptive growth trends such as AI could help investors get richer in the long run. For instance, an investment of just $4,000 in shares of AI pioneer Nvidia a decade ago is now worth more than $1.1 million. Of course, not every stock can replicate Nvidia-like gains -- and there's no way to know what will happen with Nvidia or any other company over the long term -- but the economic potential of AI means that companies serving this sector could contribute toward a diversified million-dollar portfolio in the long run. Here's why I think investors have a shot at becoming millionaires with Dell Technologies (DELL -0.43%) and Taiwan Semiconductor Manufacturing (TSM -1.22%), two companies that are playing a critical role in the proliferation of AI. Dell has made its name selling personal computers (PCs), peripherals, and server equipment, and AI is set to give these segments a big boost. The AI server market, for instance, is expected to generate a whopping $837 billion in revenue in 2030, clocking a compound annual growth rate (CAGR) of 34% through the end of the decade. And Dell is already benefiting from this fast-growing opportunity. Revenue from the company's infrastructure solutions group (ISG) shot up an impressive 34% year over year in the quarter ended Nov. 1. Sales of networking equipment and servers played a key role in this impressive growth, with revenue from this subsegment jumping 58% year over year. Dell's AI server business seems set to sustain its impressive growth. The company sold $2.9 billion worth of AI servers in the previous quarter, and received fresh orders worth a record $3.6 billion for its AI servers during the most recent quarter. Given that AI server revenue is expected to boom substantially over the next five years, there is a solid chance that Dell's revenue from this segment will take off big time. Some estimates see Dell's AI server revenue hitting at least $20 billion in fiscal 2026, which begins next month. That would be an improvement of 94% from fiscal 2025 levels. It is worth noting that the $20 billion estimate does not account for any market share gains, so things could actually be better. So, Dell seems all set to become a bigger player in the lucrative AI server market in the long run, and that could supercharge the company's growth over that time. Given that Dell is trading at just 19 times trailing earnings right now, buying this AI stock looks like a no-brainer move. While Nvidia and Broadcom have been hogging the limelight in the AI accelerator market, investors should note that Taiwan Semiconductor Manufacturing (TSMC) is the foundry that manufactures the data center chips they design. In fact, TSMC's customer base includes consumer electronics giants such as Sony and Apple, along with smartphone chipmaker Qualcomm and PC and server chip company AMD. This diversified customer base means that TSMC is set to gain from multiple AI-related end markets. Not surprisingly, the company believes it is on track for healthy growth over the next five years. TSMC's fourth-quarter 2024 results handily beat Wall Street's expectations, while its guidance was also better than what analysts were looking for. Following a 37% year-over-year increase in its Q4 revenue to $26.9 billion, TSMC is forecasting a 34% year-over-year jump in in the current quarter to a midpoint of $25.4 billion. Even better, TSMC estimates that it could finish 2025 with a mid-20% increase in revenue, driven by a jump in its revenue from AI accelerator chips that the likes of Nvidia, AMD, and Broadcom design. What's more, TSMC management added on the latest earnings conference call that it expects "the revenue growth from AI accelerators to approach a mid-40% CAGR for the five-year period starting off the already higher base of 2024." So, AI is all set to remain a key catalyst for the company over the next five years, which is why TSMC is confident of clocking a five-year revenue CAGR of 20%. Investors should also note that TSMC commands the lion's share of the foundry market with a share of 64%, which is way ahead of second-place Samsung's 12%. This gives TSMC immense pricing power, which explains why the company is expected to increase the price of its silicon wafers by 10% this year. TSMC's robust revenue growth is likely to be accompanied by stronger earnings growth as well, which could lead the market to reward it with a higher stock price. All this makes TSMC a solid stock that could very well fit into a potential million-dollar portfolio, especially considering that it is trading at an attractive 24 times earnings estimates even though it has shot up 105% in the past year.

Prediction: This Artificial Intelligence (AI) Semiconductor Stock Is Going to Soar After Jan. 29 | The Motley Fool

Foundry giant Taiwan Semiconductor Manufacturing (NYSE: TSM), popularly known as TSMC, released its fourth-quarter 2024 results on Jan. 16, and investors reacted positively to the company's performance as it not only beat Wall Street's expectations but also delivered better-than-expected guidance. TSMC stock jumped nearly 4% following its earnings report. More importantly, its solid showing rubbed off positively on its peers in the semiconductor industry as well. That wasn't surprising as the Taiwan-based company's impressive year-over-year increase of 37% in fourth-quarter revenue to $26.9 billion and the first-quarter 2025 guidance that would translate into a 35% jump from the year-ago period indicate that semiconductor sales are set to remain solid in 2025. TSMC has a market share of 64%. Most of the major chipmakers and consumer electronics companies use the company's fabrication plants to manufacture their chips. So it's a bellwether in the semiconductor industry, which is why it is not surprising to see its results lifting other names in the sector. More importantly, TSMC has guided for capital expenditures (capex) of $38 billion to $42 billion in 2025, suggesting that it remains upbeat about the long-term prospects of the industry. That would be a major increase of 34% when compared to the company's 2024 capex of $29.8 billion. The company's capex in 2023 stood at $30.45 billion, which means that its outlay decreased last year. The significant improvement in TSMC's outlay this year bodes well for Dutch semiconductor equipment giant ASML Holding (ASML 0.49%). Let's look at why. ASML stock has struggled for momentum on the market in the past year, delivering gains of just 2% as compared to the 26% gains clocked by the PHLX Semiconductor Sector index during the same period. A key reason behind ASML's weak performance has been the tepid spending on semiconductor manufacturing equipment. The Dutch company is known for selling lithography machines that allow chipmakers and foundries to etch patterns on silicon wafers that are then used for manufacturing chips. ASML's 2024 revenue guidance of 28 billion euros ($29 billion) points toward a slight increase in its top line from 2023 levels of 27.6 billion euros ($28.6 billion). Management attributes this tepid growth to the longer-than-expected recovery in certain segments of the semiconductor market. ASML's 2025 revenue guidance of 30 billion euros to 35 billion euros ($31 billion to $36.2 billion) was also disappointing as it was at the lower end of the company's original guidance range of 30 billion euros to 40 billion euros ($31 billion to $41.4 billion). The company pointed out on its October 2024 earnings conference call that the recovery in semiconductor equipment spending is "more gradual than what we anticipated before, and it will continue in 2025." As a result, its customers are exercising cautiousness. However, TSMC's latest results indicate otherwise as the company is setting itself up to capitalize on the chip opportunities created by the growing demand for artificial intelligence (AI), high-performance computing (HPC), and 5G smartphones. TSMC management points out that "a higher level of capital expenditures is always correlated with higher growth opportunities in the following years." The substantial jump in TSMC's spending is great news for ASML investors. According to Morningstar, TSMC has accounted for 33% of ASML's revenue on average over the past five years. As a result, TSMC's higher outlay should directly benefit ASML, especially considering that the former is going to direct most of its capital spending on advanced chip nodes. More specifically, TSMC is going to spend 70% of its 2025 capex on advanced process nodes, which refers to chips manufactured using 7-nanometer (nm), 5nm, and 3nm processes. ASML is the only supplier of EUV (extreme ultraviolet) lithography systems that allow the likes of TSMC to manufacture such advanced chips, which are now being used for powering AI data centers, smartphones, and PCs (personal computers). TSMC says that its revenue from sales of AI accelerators tripled last year. It expects AI chip revenue to double in 2025. More importantly, TSMC is forecasting a 40% annual increase in sales of its AI accelerators over the next five years. All this explains why TSMC is ramping up its capex in 2025 in a bid to meet the robust demand from its customers. ASML is set to release its fourth-quarter 2024 results on Jan. 29. The company expects 9 billion euros ($9.3 billion) in revenue for the current quarter at the midpoint, which would be a nice improvement of 25% from the same period last year. The midpoint of ASML's 2025 revenue guidance stands at 32.5 billion euros ($33.6 billion), which points toward a 16% increase from 2024's estimated revenue. However, don't be surprised to see ASML carrying forward the strong momentum that it is set to attain in the 2024 fourth quarter into the new year as well and deliver better-than-expected results. After all, the healthy hike in capex by ASML's major customer could allow the Dutch giant to fulfill more orders, and it may even upgrade its outlook for 2025. ASML already had an order backlog of 36 billion euros ($37.3 billion) at the end of the third quarter of 2024. TSMC's incremental spending could lead to a strong jump in ASML's order inflow this year. And ASML may fulfill more orders as other chipmakers and foundries would not want to lose ground to TSMC and could place orders for advanced EUV lithography machines. So, the stage seems set for ASML to deliver better-than-expected results and guidance when it releases its results next week. That's why savvy investors can consider buying this AI stock that is trading at an attractive 30 times forward earnings, which is lower than the tech-laden Nasdaq-100 index's earnings multiple of 32.5.

This Chip Stock Could Be the Best Investment of the Decade | The Motley Fool

Finding stocks that are among the top investments of the decade isn't easy. Many trends can rise and fall, causing some stocks to falter after a few years. However, one industry with obvious staying power that will benefit no matter how big other trends get is chip companies. While I believe artificial intelligence (AI) will become a huge factor, it's hard to identify which company will be the biggest winner a decade from now. However, the chip companies that supply the tools needed to process and run these models will undoubtedly succeed. My top pick in this space is Taiwan Semiconductor (TSM -1.22%). I think it's primed to be one of the best investments of the decade, as management has strong projections about the business's growth trajectory. Taiwan Semiconductor is a contract chip manufacturer, which means companies can design their own chips and then outsource the production to it. This has been a key shift in the chip industry, as some of the most cutting-edge companies have chosen this route rather than using a chip that another company designed. Advanced Micro Devices, Nvidia, and Apple are among the clients that use this service. Those companies are heavy hitters in the high-tech world, but many more companies are designing their own chips, rather than having TSMC produce them. Because Taiwan Semi is neutral in this field, it doesn't matter who the winner is in the AI race, since it's likely using technology with Taiwan Semi chips in it. This led to phenomenal growth lately, as AI-related revenue for TSMC tripled over the past year. However, even after that strong year, management projects that AI-related revenue will double again in 2025. That's phenomenal growth that every investor wants to capitalize on. For the next five years, management projects that AI-related revenue will have a compounded annual growth rate (CAGR) in the mid-40% range, so this segment is far from done growing. However, that's only a part of TSMC's business, as it only makes up around a mid-teens total of revenue. Over the next five years, TSMC's management believes its revenue growth can reach 20% CAGR in U.S. dollars. For a company of TSMC's size, that's incredible growth that will easily allow it to become one of the top-performing stocks of the decade -- if it achieves those projected levels. But what kind of returns should investors expect? Even though management has projected strong growth in an industry that's clearly expected to benefit from AI proliferation, TSMC's stock trades for a fairly cheap price tag. At 23.5 times forward earnings, TSMC is priced the same as the broader market, measured by the S&P 500, which trades at 23.4 times forward earnings. The broader market isn't expected to grow revenue by 20%, so Taiwan Semi is clearly a cheap stock at these levels and has plenty more room to soar. Over the next decade, the chip market will undoubtedly experience downturns, but the overall trajectory is up and to the right. The amount of computing we're using is rapidly increasing, and TSMC stands to be one of the benefactors of this shift. Taiwan Semi is one of the best stocks to buy and hold for the next decade, and anyone who takes a position now will be glad they did years down the road.

This Trillion-Dollar Artificial Intelligence (AI) Chip Stock Has Surged 110% in the Last Year. Could a Stock Split Be on the Horizon? | The Motley Fool

Shares of Taiwan Semiconductor Manufacturing soared over 100% during the last 12 months, placing the chip giant in rare company -- the trillion-dollar club. As of Jan. 17, there are 10 public companies in the world with valuations of at least $1 trillion. With the exception of Warren Buffett's investment powerhouse, Berkshire Hathaway, each trillion-dollar stock is playing a leading role in the ongoing artificial intelligence (AI) revolution. After gaining 110% over the last year, chip stock Taiwan Semiconductor Manufacturing (TSM -1.53%) joined a major client, Nvidia, in the trillion-dollar club. With a current share price of $213, TSMC is trading near a 52-week high. Below, I'm going to explore why TSMC could initiate a stock split sooner rather than later and how such a move could impact investors. The chart below illustrates TSMC's market cap gains over the last year. In just 12 months, the company has seen its valuation essentially double from roughly $500 billion to more than $1 trillion today. Given this degree of valuation expansion in such a short time frame, a stock split could be a reasonable move to make right now. When a company splits its stock, the number of outstanding shares rises. For example, when Nvidia completed a 10-for-1 stock split several months ago, the number of outstanding shares increased by tenfold while the company's share price dropped by a factor of 10. All told, stock splits do not change a company's valuation. Since splits result in an increased number of outstanding shares, it takes significantly more buying activity to push a stock price higher. This makes stock splits a potential signal of a bullish management team and its confidence in the company's long-term prospects. Pursuing a stock split could indicate that management believes the stock will continue to rise, even though unlocking these gains can become tougher to achieve due to a higher outstanding share count. TSMC sits in a unique position in the chip realm. The company specializes in sophisticated fabrication processes that bring chips from Nvidia, Advanced Micro Devices, and many others to life. Industry research suggests that investment in AI infrastructure will be in the trillions for years to come. And when it comes to GPUs in particular, the total addressable market is expected to be worth nearly $300 billion by the end of the decade. Considering Nvidia, AMD, and many of the hyperscalers including Microsoft, Amazon, Alphabet, and Meta Platforms are all bringing more chipware to the market, I see TSMC experiencing AI tailwinds for several years to come. But at more than $200 per share, isn't TSMC's stock beginning to look expensive? Well, not so fast. When it comes to valuation, looking at the share price alone won't tell you much. If you see that TSMC's stock price is $200 and Nvidia's is $140, that doesn't necessarily mean that TSMC is the more valuable company. In this example, Nvidia's market cap is $3.4 trillion -- nearly triple that of TSMC. To determine if TSMC stock is expensive, you'll need to look at valuation multiples. In the chart below, you can see that the stock's forward price-to-earnings (P/E) ratio of 23.4 is nearly identical to that of the average forward P/E for the S&P 500 (^GSPC 1.00%). These dynamics suggest that investors view a position in TSMC as having the same upside as the broader market. When you look at TSMC in this way, the company's soaring valuation and high share price don't actually seem so pricey. Furthermore, given the upside from rising investment in AI capital expenditure (capex) over the next several years, I think it's highly likely that shares of TSMC will eventually receive a notable premium compared to the S&P 500. For all of these reasons, I see TSMC as a compelling opportunity to buy and hold for the long run -- regardless of a potential split.

Why Taiwan Semiconductor Manufacturing Stock Was Climbing Today | The Motley Fool

Shares of Taiwan Semiconductor Manufacturing (TSM 2.59%) were one of several artificial intelligence (AI) stocks moving higher today, a broad response to President Trump's announcement of the new Stargate AI infrastructure project yesterday afternoon. As of 12:27 p.m. ET, TSMC stock was up 2.9%. Yesterday, President Trump announced a new AI infrastructure project called Stargate, bringing together the leaders of Oracle, OpenAI, and Softbank, the Japanese tech mega-investor run by Masayoshi Son, in a joint venture to invest at least $100 billion in new infrastructure to power AI. The joint venture could invest as much as $500 billion. A wide range of AI stocks were climbing on the news, including Arm Holdings, Nvidia, and Broadcom, as the deal looks set to kick off a windfall in the AI sector. TSMC is also likely to be a beneficiary from the move, as it's the global leader in third-party semiconductor manufacturing and dominates the market for advanced chips, the kind being used to run AI data centers. More money spent to build data centers will almost certainly lead to more revenue for TSMC, as its top customers include major players in AI and tech like Nvidia, Broadcom, Arm, and AMD, so it's understandable that Taiwan Semi is riding the rising tide higher. There's a lot of excitement around the news, and it's not surprising to see stocks that are direct winners from the deal, like Arm, surging on the news. However, there's a difference between announcing a project of this size and completing it, and it could take years to invest the $100 billion or more. Notably, 10 data centers, built by the venture, are already under construction in Texas. TSMC's success doesn't depend on Stargate, but it would be a boon for the company. Either way, the AI boom still has a lot of legs, and that should carry TSMC higher.

Why AI Stocks Broadcom, Lam Research, and Monolithic Power Are Rising Today | The Motley Fool

These weren't the only three AI-related chip stocks rising today, but this group does showcase a rather broad spectrum of products, from Broadcom's AI networking chips, to Lam's etch and deposition equipment for advanced chipmaking, to Monolithic's AI power modules. The news lifting all boats in the sector likely had to do with yesterday's announcement of the Stargate data center project by President Donald Trump and a host of other AI technology companies. Yesterday, a group of technology companies, including Oracle, Softbank and OpenAI, gathered at the White House to announce Stargate. Stargate is an AI-related joint venture, bringing these companies and other investors together to build out next-generation AI infrastructure in the U.S. The announcement may have spurred a rally in AI-related chip stocks due to the financial figures the group touted. The companies announced an initial $100 billion investment, but also threw out a $500 billion figure as the potential for future new Stargate expansions over the next four years. Given that none of these companies make their own chips -- at least not yet -- that stunning figure likely means lots of Nvidia GPUs. Yet even if Stargate primarily uses Nvidia GPUs and not custom ASICs, which Broadcom makes, Stargate will still likely use Broadcom's Tomahawk and Jericho network switching and routing chips. Moreover, all leading-edge semiconductors and memory today require intense etch and deposition steps, which would benefit semiconductor equipment generally and Lam Research specifically, which leads in these crucial chip manufacturing categories. Meanwhile, these massive data centers will require huge amounts of power, and Monolithic Power provides the 48 volt power management systems used by many AI chip modules. While there has been some debate as to whether Monolithic Power may have lost its dominant share within Nvidia chip modules -- a concern that caused Monolithic stock to plunge late last year -- it should still retain a key share of these AI power module systems. In fact, sell-side analysts at Oppenheimer just named Monolithic as one of the firm's top AI stocks for 2025. While these stocks should climb on continued AI investment news, the Stargate announcement by itself shouldn't be this much of a game changer. After all, the initial $100 billion includes money already spent on a Texas data center in progress that began last year under the Biden administration. So, Stargate doesn't appear to be an entirely new AI cluster, but rather a mere augmentation of one already underway. Moreover, it's unclear where all this money will come from. As noted in The Wall Street Journal, Oracle only has $11 billion in cash, Softbank has $30 billion, and OpenAI is currently losing money. So, that $100 billion seems like a stretch at the moment, let alone $500 billion. Still, this high-profile event has followed some other bullish AI investment indicators of late, including the strong earnings report and guidance from Taiwan Semiconductor Manufacturing last week, along with Microsoft's early 2025 announcement that it would be spending $80 billion on its own AI infrastructure this year. Thus, it's no surprise to see these AI infrastructure stocks moving higher today on the cumulative good news. And with Lam Research and Monolithic having had subpar years last year, it's no surprise to see their stocks rallying even more in a "catch-up" trade. Still, while today's announcement was a positive, it would be wise not to over-hype vague announcements in the early days of the new administration. Continued moves higher will require sustained AI investment, as well as evidence that customers are seeing productivity gains and returns on all of this massive spending.