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With the U.S. technology sector booming again, investors have to start playing a different game than they have in the past couple of years. The new strategy focuses on identifying the hottest names in the sector that are driving the rapid growth and adoption of artificial intelligence. It also includes uncovering the “lateral” opportunities poised to benefit from this powerful tailwind in the months and years ahead.
These lateral plays will be less popular and dull in the grand scheme. But that also means there will be less speculative behavior, limiting scary price whipsaws.
One such under-the-radar winner is Taiwan Semiconductor Manufacturing, and its latest catalyst comes from an unlikely source: Oracle.
Oracle’s Cloud Surge Sends a Ripple Through the Supply Chain
Oracle’s recent earnings sent its stock soaring over 35%, largely thanks to a 28% year-over-year (YOY) surge in cloud revenue, which hit $7.2 billion.
But the more telling number was Oracle’s $455 billion in remaining cloud infrastructure obligations—a staggering 359% jump.
What does this have to do with Taiwan Semiconductor?
Oracle’s price surge is largely due to its rapid cloud expansion, which depends on the most advanced semiconductors available. Oracle doesn’t make chips; it relies heavily on NVIDIA—and by extension, on NVIDIA’s primary chip supplier, Taiwan Semiconductor.
Taiwan Semiconductor: The Backbone of AI Infrastructure
Here’s where the hidden value lies.
NVIDIA may be the poster child of AI chips, but it’s Taiwan Semiconductor that manufactures the cutting-edge nanochips powering those GPUs.
TSMC holds over 80% of the advanced chip fabrication market, particularly in the 5nm and below space.
So, while Oracle and NVIDIA are both hot names right now, the quiet king of AI chips is Taiwan Semiconductor.
The more Oracle expands its cloud services, the more chips NVIDIA must supply—and the more wafers TSMC must produce. It’s a high-stakes feedback loop, and TSMC is the foundational enabler.
Why Taiwan Semiconductor Still Has Room to Run
Despite trading near its 52-week high after a 22% rally in the past quarter, this new ceiling isn’t even close to what could be called “intrinsic value.”
Some believe that Oracle’s and NVIDIA’s growth has not yet been priced into Taiwan Semiconductor’s current valuation.