Needed for America: An AI Alliance by Intel, TSMC and Nvidia

You are receiving this email because you signed up to receive our free e-letter Gilder's Guideposts, or you purchased a product or service from its publisher, Eagle Financial Publications. [Gilder Guideposts] [Technology Report]( [Tech Report PRO]( [Moonshots]( [Private Reserve]( Needed for America: An AI Alliance by Intel, TSMC and Nvidia by George Gilder and Dr. Robert Castellano 11/27/2024 SPONSORED CONTENT [Trade on Tuesday. Profit on Friday. Rinse & Repeat]( Trading Legend Jim Fink, just unleashed the world’s first “rinse and repeat” trade... and it’s helping regular investors double their money every week like clockwork. This simple trade plays out each Tuesday — and could double your money by Friday. His next trade goes live soon. Make sure you don’t miss it. [Get the full details now.]( Note from George Gilder: I have long admired Dr. Robert Castellano, and his Information Network, for superb insight into semiconductor markets. This week, I proudly welcome him to the Gilder Technology team. For readers, one benefit is that starting next week I will be able to do two Gilder’s Guideposts a week, one as usual with my friend and collaborator of many decades, Richard Vigilante, and one with Dr. Castellano. --GG As we escape a tempestuous political season, we might imagine that Trump’s victory somehow affirmed his claims of an economic debacle bruising America’s middle class, with China rooking and reaming our intellectual property as a prime culprit. Yet we semiconductor guys, with our heads in the silicon—for the last 50 years or so—find it hard to see our economy as crippled. Silicon remains king, and the United States remains king of silicon, with our corporations commanding, according to various estimates, between 49% and 70% of global market cap, compared to Chinese corporations at around 6%. Nearly all that U.S. bulge feeds on chips. Meanwhile, we are pioneering a new paradigm of artificial intelligence (AI) and it’s nearly all still based on silicon. Beyond politics, two giants, NVIDIA (NASDAQ: NVDA) led by Jensen Huang, in his signature swashbuckling black leather, and Intel (NASDAQ: INTC) ruled by Pat Gelsinger, in a sleek grey blazer and a rakish tee-shirt, wrangle publicly over the fate of Moore’s Law: the biennial doubling of computer power on chips. It was ordained by Intel co-founder Gordon Moore with the help of his advisor, and ours, Carver Mead, who did key research and named the law way back in 1965. Moore’s Law epitomizes Intel. Jensen says “it’s over,” debunked and displaced by Jensen’s Law: “NVIDIA is achieving millionfold advances every decade.” Pointing to the continued ascent of transistor numbers on Intel chips, Pat Gelsinger says, “Moore’s Law is alive and well!” With Nvidia shares now worth some $3.5 trillion, making it the world’s most valuable company, and Intel market cap some 35 times lower, Jensen’s law seems to rule. But Robert Castellano, our new colleague, tells us that they are both right. They just need to stop competing in the wrong directions and adopt win-win strategies. The semiconductor industry’s relentless growth in AI datacenter computing has exposed a critical bottleneck: manufacturing capacity. Nvidia, the leader in AI processors, massively relies on Taiwan Semiconductor Manufacturing Company (TSMC) for leading-edge production. However, TSMC’s leading edge wafer fabs, operating with geometries in the billionths of a meter at 3 nanometers (nm) and 5nm, are fully booked. Beyond Nvidia, TSMC’s customer list is a constellation of such mostly fab-less leaders as Apple (NASDAQ: AAPL), Advanced Micro Devices (NASDAQ: AMD), Arm Holdings PLC (NASDAQ: ARM), Qualcomm Inc. (NASDAQ: QCOM), MediaTek Inc. (OTC: MDTTF) (TW: 2454) and Broadcom Inc. (NASDAQ: AVGO) that provide silicon designs for modern electronics and AI. [Have You Seen This $11 Trillion 'Tech Strip?']( While many folks today are wondering what to do with their money… a revolutionary “sheet” of new technology has quietly sparked an $11 trillion tech revolution. Investors who get in FIRST have a rare chance to position themselves in front of a tsunami of profits. [Click here to see how anyone can profit fast.]( Also on the list, surprisingly, is Intel, which runs vast wafer fabs around the globe. But Intel, unlike TSMC, also designs scores of leading-edge microprocessors that its own fabs cannot currently handle. Intel has outsourced production of some of its nanometer-node chips to TSMC because of delays in Intel’s internal manufacturing. This dual reliance on TSMC by Nvidia and Intel strains an already overloaded production pipeline. It risks delays in delivering Nvidia’s vital AI processors. Without Nvidia’s leading-edge chips, companies such as Apple, Meta (NASDAQ: META), Amazon.com Inc. (NASDAQ: AMZN) and Alphabet (NASDAQ: GOOGL) that account for most of that huge U.S. dominance in global market cap, would founder. A strategic realignment, where Intel Foundry Services (IFS) absorbs Intel’s non-AI production from TSMC, could unlock significant capacity for Nvidia and reshape the competitive dynamics of the semiconductor industry. Realignment: Leveraging Intel Foundries to Free TSMC Capacity Under this proposed realignment, Intel Foundry Services would take over the production of non-AI workloads currently manufactured at TSMC, allowing the Taiwanese foundry to allocate more of its 3nm and 5nm capacity to Nvidia’s AI processors. This shift would include products such as Intel’s Meteor Lake “chiplets,” “ARC” gaming graphics processors (GPUs), and integrated graphics solutions. These chips require less critical timelines compared to Nvidia’s industry-leading and enabling Hopper and Blackwell GPUs. Table 1: Intel’s TSMC Workload and Strategic Shift to IFS Category TSMC Workload for Intel Shift to IFS Impact CPUs Chiplets for Meteor Lake, Raptor Lake Intel 20A/18A at IFS Frees TSMC capacity for Nvidia’s AI chips. GPUs Intel ARC discrete GPUs Intel 3 at IFS Enables TSMC to prioritize Nvidia’s Hopper and Blackwell. Chipsets Integrated graphics and IoT solutions Mature nodes at IFS Optimizes TSMC’s resources for advanced nodes. Source: [The Information Network]( This redistribution not only addresses Nvidia’s immediate supply chain challenges but also positions Intel as a key partner in Nvidia’s future success. Additionally, TSMC would benefit from increasing its high-margin AI business, while Nvidia would gain more production capacity for its flagship GPUs. Financial Implications: NVDA, TSM, and INTC The proposed realignment between Nvidia, Intel, and TSMC presents a strong business case for all three stakeholders. Nvidia stands to benefit the most, as additional capacity at TSMC would alleviate supply constraints for its high-margin AI processors. The shift would enable Nvidia to ramp production of Hopper and Blackwell GPUs, driving significant revenue growth to meet surging demand. For TSMC, reallocating its capacity to Nvidia’s advanced AI chips would increase profitability, as AI processors command higher average selling prices (ASPs) compared to consumer and non-AI workloads. Meanwhile, Intel Foundry Services (IFS) would gain from the influx of new business, including its own internal products and potentially Nvidia’s less advanced products, helping Intel reestablish itself as a credible foundry player. Table 2: Financial Benefits by Stakeholder Company Estimated Revenue Impact ($B) Details Nvidia +$5–8 Billion Increased production of Hopper and Blackwell GPUs to meet unmet demand. TSMC +$2–4 Billion Higher ASPs from reallocating capacity to Nvidia’s high-margin AI processors. Intel (IFS) +$4–6 Billion New foundry customer business from Intel’s own product shift and potential Nvidia collaborations. Source: [The Information Network]( [Everything This A.I. Can Do For Your Trading?]( If you learned everything this artificial intelligence could do for your trades right now, there wouldn't be any surprise. And you must admit, everybody likes surprises... But nobody likes losing money. Sit in on this [Live A.I. Stock Forecast Training](, which will take approximately one hour of your time tomorrow. Bring along a couple of your favorite ticker symbols, sit back with your preferred beverage, and prepare to be amazed as we forecast as many as we can get to in real-time. Be curious. [Seize the chance to learn something completely new.]( This strategic shift could enable Nvidia to further secure its leadership in AI while providing Intel and TSMC with significant new revenue streams. This alignment positions all parties to address the immediate bottlenecks in the semiconductor supply chain while capitalizing on the expanding demand for AI computing. The main overlap between Intel and Nvidia’s product lines is GPUs and data center hardware, but their focus differs. Nvidia dominates in high-performance AI and data center GPUs, while Intel focuses on consumer GPUs, such as ARC and integrated graphics solutions. This divergence creates opportunities for strategic collaboration without major competitive conflicts. Shifting Intel’s non-AI production from TSMC to Intel Foundries would further align their strengths, enabling TSMC to focus on Nvidia’s high-demand AI processors while Intel expands its gaming GPU and chipset businesses. Table 3: Product Overlap and Strategic Fit Product Line Intel Nvidia Overlap & Strategic Fit Gaming GPUs ARC GPUs (low current share) GeForce RTX (dominant) Intel could grow in gaming, complementing Nvidia’s AI focus. AI Processors Gaudi, Habana (limited) Hopper, Blackwell Nvidia dominates; Intel can enhance foundry collaboration. Data Center GPUs Xe GPUs (limited adoption) Hopper, Blackwell Nvidia leads, with Intel trailing in adoption and revenue. Source: [The Information Network]( Intel’s mid-range consumer GPU focus complements Nvidia’s high-end GPU leadership. This synergy reduces direct competition and makes the proposed collaboration more feasible, benefiting both companies by aligning resources and priorities. Competition in Gaming and Graphics What opportunities would Intel be forgoing by yielding TSMC capacity? Practically speaking, none, if it could successfully manufacture its own non-AI chips. It has the equipment and fabs to do that. If yields are a bit low to start, which is why this work ended up at TSMC in the first place, there is no practical alternative to getting on the learning curve and getting better. The switchover could be done gradually as yields improve, but it must be done ultimately or IFS has no future. In theory, it might seem that INTC, by releasing some of TMSC’s most advanced process lines to NVDA, it would be yielding the AI data center market without a fight. In practice, that has already happened. Nvidia’s lead in that market already is overwhelming compared to both INTC and AMD. As the graph below shows, INTC has been losing ground in data centers and AMD has gained—a little. Meanwhile NVDA has transformed the market with its AI processors such as the Hopper H200 and the anticipated Blackwell GPU. NVDA’s grip will only tighten in the near term. Analysts predict Nvidia’s data center revenue will increase another 9% quarter-over-quarter, with a staggering 97% year-over-year growth in the upcoming quarter. This proposed realignment of semiconductor manufacturing capacity offers a pragmatic solution to the industry’s supply chain challenges with three big winners (not counting the global economy, which needs these chips)! With Intel taking non-AI workloads back to its own foundries, Nvidia would gain additional capacity at TSMC for Hopper and Blackwell. Intel, through its foundry services, could establish itself as a critical partner for Nvidia while addressing its own revenue challenges. For TSMC, this strategy would mean higher margins and more efficient resource allocation. Is there a moral to this story beyond the fate of three companies? Sure. To maintain U.S. global leadership in technology we need to maintain the well-knit global ecosystem that got us here and return to the win-win economics that opens the world to the future. Sincerely, [The Editors] George Gilder, Richard Vigilante, Steve Waite, and John Schroeter Editors, Gilder's Guideposts, Technology Report, Technology Report Pro, Moonshots, and Private Reserve About George Gilder: [George Gilder]George Gilder is the most knowledgeable man in America when it comes to the future of technology and its impact on our lives. 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