When AI Visions Meet Reality

Hello, it’s Debby in Taipei. TSMC — one of the world’s most important technology companies — has good reason to join many of its peers in ag [View in browser]( [Bloomberg]( Hello, it’s Debby in Taipei. TSMC — one of the world’s most important technology companies — has good reason to join many of its peers in aggressively touting generative AI. But first... Three things you need to know today: • Google’s antitrust suit over ad tech [sent back to a Texas court]( • Spotify will lay off 2% of its workforce, [primarily in podcasting]( • ChatGPT [arrived in the doctor's office]( Chips and AI It’s been mandatory for Asian tech executives to name-drop [Nvidia Corp](bbg://securities/NVDA%20US%20Equity). Chief Executive Officer Jensen Huang over the past two weeks. The management of [Taiwan Semiconductor Manufacturing Co.](bbg://securities/2330%20TT%20Equity) likewise couldn’t resist. After hosting Tuesday’s annual shareholders’ meeting, TSMC Chairman [Mark Liu](bbg://people/profile/4255945) — an industry celebrity in his own right -- beamed when he talked about rubbing shoulders with Huang during the Nvidia honcho’s recent visit to Taiwan. He invoked the name of his key customer several times when talking to reporters. Seems even Asia’s largest company was keen to bask in the aura of one of the darlings of the current AI craze, which last week became the first chipmaker to cross [$1 trillion]( in market value. TSMC executives argued that demand for AI applications and chips like the ones Nvidia designs will likewise lift the Taiwanese company. But for now, TSMC has a number of problems to tackle. Despite Wall Street’s obsession with all things AI, TSMC executives spent a big chunk of Tuesday discussing near-term economic realities. Taking observers by surprise, Liu said it expected to 2023 spending to come in near the lower end of what it projected earlier — $32 billion. That’s hardly a drop in the bucket, but is down from 2022 and, to those accustomed in past years to watching TSMC’s spending rev up, a bit of an alarm bell. That’s because capex is a measure of anticipation of future demand — a chipmaker spends to expand today ahead of sales down the road. In fact, Liu said the chipmaker’s capex was reaching a plateau, unlikely for now to undergo another big jump like the roughly 74% gain from 2020 to 2021. The TSMC veteran even offered measured comments about the mixed-reality headset its biggest customer Apple just [released](. He talked about room for improvement in a technology that’s struggled to gain traction for the longest time. That cautious overall tone has much to do with external factors the company has little control over.  Global smartphone shipments will drop this year, TSMC Chief Executive Officer [C.C. Wei](bbg://people/profile/1779152) said, though he expects his company’s market share to grow. Meanwhile, slowing global economic growth and Washington’s [Chinese chip sanctions]( will constrain sales by TSMC and other contract chipmakers including China’s [Semiconductor Manufacturing International Corp.](bbg://securities/981%20HK%20Equity) over the next 12 to 18 months, according to Moody’s Investors Service. Inevitably, Liu and other executives got asked about tensions in the Taiwan Strait repeatedly, the well-publicized reason [Warren Buffett](bbg://people/profile/1387055) [sold]( his stake in TSMC shortly after buying in. Just this weekend, US officials [warned](about increasing Chinese military aggression around an island Beijing considers part of the fold. In response, Liu said TSMC is trying to reassure its customers by diversifying overseas. All that tends to mar the exuberance whipped up by the advent of next-generation AI. The Sage of Omaha may’ve been onto something: few companies are as well-placed to benefit in the future explosion of technology as TSMC is. But the near-term challenges are perhaps too many for investors to brush aside. —[Debby Wu](mailto:dwu278@bloomberg.net) The big story Apple unveiled its [long-awaited mixed-reality headset](, the Vision Pro, capping more than seven years of development and vaulting the company into a market with big ambitions. The company also rolled out overhauled versions of its [iPhone and iPad software](, introduced its first [large-screen MacBook Air]( and showed off new versions of the Mac Studio and Mac Pro. One to watch [Watch analysis of Apple’s big product debut]( on Bloomberg Technology. Get fully charged British Airways, Boots and the BBC told thousands of staff that personal information may have been compromised by a cyberattack on their [payroll provider, Zellis.]( The EU wants tech companies to warn users about AI-generated content that [could lead to disinformation](. Indian education-tech company Byju delayed its previously envisaged IPO as it [struggles with financial challenges](. 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