The tech industry is bracing itself for a potential shortage of semiconductor chips, driven by surging demand for artificial intelligence infrastructure and the looming smartphone and PC upgrade cycle. According to a recent report by consulting firm Bain & Company, this shortage could have significant implications for the industry. In this scenario, three companies are poised to benefit from the increased demand for chips: Nvidia, Taiwan Semiconductor Manufacturer, and ASML.
Nvidia, the leader in graphic processing units (GPUs), is already experiencing insatiable demand for its chips, which are essential for AI model training and inference. With an over 80% market share in the GPU space, Nvidia is well-positioned to capitalize on the shortage. Its CUDA software platform has become the industry standard, and the company’s accelerated development cycle ensures it stays ahead of the curve.
Taiwan Semiconductor Manufacturer, the world’s largest semiconductor manufacturer, is also set to benefit from the shortage. As the primary supplier of chips to major tech companies, including Apple, Nvidia, and AMD, TSMC’s foundries will likely operate at or near full capacity. This will enable the company to increase prices and drive revenue growth. Moreover, TSMC is investing in new fab construction and chip size reduction, which will further boost its capacity and efficiency.
ASML, the Netherlands-based semiconductor equipment manufacturer, is critical to the industry’s ability to increase capacity and meet demand. The company’s high numerical aperture extreme ultraviolet lithography system is revolutionizing chip manufacturing productivity and reducing production costs. With an industry upturn expected in 2025, ASML is poised to capitalize on the increased demand for its equipment.
All three companies offer attractive valuations, with forward price-to-earnings ratios and price/earnings-to-growth ratios indicating undervaluation. As the chip shortage looms, investors may want to consider adding these stocks to their portfolios.
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