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The A.I. Crown Jewel

How To Cash In On The $150 Trillion A.I. Megatrend

So, you know how we keep hearing about the AI revolution like it's some crazy sci-/fi movie plot?

Well, it's real, and it's happening now.



/T_he most publicized example of AI adoption is the large language model app ChatGPT.

Two more AI companies making waves are Perplexity AI and the language model for dialogue applications, Google Bard AI.

Everyone from the professional power user to the retail investor wants to learn about these programs and, ideally, how they can get in on the action with an investment.

According to one source, there are approximately 58,000 AI companies worldwide, with 25% of them based in the U.S.

/T_his massive /figure is comprised of many startups and companies still exploring how to implement AI into their operations. Still, it also includes huge companies like Amazon, Tesla, and Microsoft.

/T_he race for AI domination is broadening.

It's like a global talent show; the biggest contestants are the United States, China, Canada, and the European Union. /T_hese guys are going all out to grab the AI crown.

But this race isn't only dominated by tech nerds chasing the next ChatGPTlike program.

Everyone from every industry wants a piece of the pie.

Imagine defense companies using AI to secure countries and borders or gaming /firms making characters so lifelike that you swear you've seen them around town.

And how about healthcare? An interactive AI bot could soon be the medical professional you consult with on your phone.

Leading /financial institutions like Goldman Sachs and Visa will invest in AI to advance their fraud detection, better analyze real-time risk pro/files, and enhance customer experiences.

As industry after industry /figures out how to improve operations, growth, and pro/fitability through the integration of AI, Wall Street sees massive pro/fit potential.

Before we dig any deeper into AI, you need to know that there's a massive di/fference between what most people know to be traditional AI and what's captivated the imaginations of investors and techies: generative AI.

Traditional AI is designed to perform a speci/fic task based on prede/fined rules and patterns. Generative AI, however, aims to create entirely new data that resembles human-created content.

/T_hink of it like this...

Traditional AI is like a skilled craftsman who's incredible at one speci/fic task - maybe carving intricate designs into wood.

You give this craftsman a piece of wood and a design to follow, and you can bet it will be executed /flawlessly. But ask him to create a brand new design from scratch, and he may struggle because that's not what he's programmed to do.

Generative AI, on the other hand, is like an artist. It can mimic existing designs but also create something entirely new and unexpected. /T_he rules programmed into a generative AI program are merely a template; it's generating new content that could be as nuanced and complex as something a human might come up with.

Simply put, traditional AI is about following rules and patterns to accomplish speci/fic tasks; Generative AI is more about pushing the envelope and coming up with something new.

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/T_he AI revolution that's currently unfolding is designed around generative AI.

And the 'crown jewel' that's making generative AI possible is the H100 Graphics Processing Unit (GPU).

And as you can imagine, demand for these GPUs is o/ff the charts.

Which is why I've asked Senior Analyst Bob Byrne to tell us how we can cash in on the ever-increasing demand for the AI crown jewel.

So I'll turn it over to Bob…



Editor, Altucher's Investment Network

Sincerely,

James Altucher

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The Making of an AI Crown Jewel

'Generative AI' is the buzzword of the year…

And like James said, the future of AI revolves around it.

But what makes generative AI possible?

/T_here's only one answer… Nvidia's H100 GPU.

We've rightfully coined it the 'crown jewel' of AI because without it none of the future advances in AI will be possible.



/T_he H100 is Nvidia's successor to its A100 GPU, which, up until the launch of the H100, had been the foundational chip for large language model development e/fforts like ChatGPT.

I want to stop for a second and ensure you understand what a GPU is because this may be a pretty foreign concept unless you've grown up in the gaming world.

GPU stands for Graphics Processing Unit. And it acts like a super-e/fficient worker in your computer that's able to handle a ton of jobs at once.

Imagine you had to color a giant picture. If you do it yourself, it might take you a really long time. But suppose you have a dozen buddies helping you, with each friend coloring in a di/fferent part simultaneously. In that case, you'll get the job done much faster.

/T_hat's basically what a GPU does. It's designed to take on a ton of small tasks and do them at the same time, really quickly.

So, when you have a computer that needs to perform a huge number of calculations rapidly, you can bet that computer will have a bunch of really powerful GPUs inside of it.

Getting back to Nvidia's H100 GPU...

According to the company, the H100 is up to 9x faster for AI training and 30x faster for inference than the A100. It's simply a dramatically improved piece of hardware.

But the H100 is not just advanced tech; it's ready-made for businesses to use for their AI needs, allowing companies to implement their AI technology faster than ever.

I don't want to get too deep in the weeds regarding the technical aspects of the H100, so let's stick with the top 4 ways this AI crown jewel impacts the operations of companies fortunate enough to /find a supply of these semiconductor chips.

• 1. Advanced AI Development: /T_he H100 and NVIDIA's AI software help businesses create high-performing AI apps quickly, giving them an edge in the fast-paced AI market.
• 2. Elegant AI Work/flows: /T_he H100 and NVIDIA AI software work smoothly with popular AI tools, making it easier for businesses to develop and innovate in AI without worrying about software issues.
• 3. Maximized E/fficiency: /T_he H100 boosts AI e/fficiency, speeding up data analysis and decision-making for businesses in real time.
• 4. Cost Savings: /T_he H100's subscription model and included software make AI adoption more a/ffordable and streamlined for businesses.

/T_he bottom line is that the H100 makes AI tasks faster and supports big language models. It's excellent for improving chatbots, research, and data analysis. It helps businesses and researchers do more faster and better in AI.

But there's a catch.

Purchasing the H100, described as the world's /first computer chip designed to support generative AI, will set you back as much as $40,000. Worse still, Nvidia is essentially sold out of these AI crown jewels until 2024!

Demand for Days

You'd think a $40,000 price tag would be enough to scare o/ff buyers, but it's not

When companies see nothing but opportunity and universally believe that AI is the next great technological revolution, you can bet they'll do anything short of breaking the law to get their hands on the chips that make the process possible.

How hard is it to get your hands on one of these AI crown jewels?

Earlier this year, Sharon Zhou, co-founder and Chief Executive O/fficer of Lamini, a startup that helps companies build AI models, compared the hoarding of AI chips to what we saw with toilet paper during the COVID pandemic.

Tesla CEO Elon Musk told /T_he Wall Street Journal CEO Council Summit that GPUs [like the H100] are signi/ficantly harder to get than [recreational] drugs.

Jean Pauli, CEO of the AI start-up Docugami, has been scrounging for GPUs all year. He told the New York Times he considers the chips necessary to operate and design AI applications as valuable as rare earth metals.

From what the Financial Times tells us, Nvidia is expected to ship 550,000 H100 AI GPUs this year.

/T_hat sounds like a massive supply of chips until you consider reports quoting Elon Musk saying ChatGPT 5 may require as many as 30,000-50,000 H100 GPUs. And that's only one company!

It may not feel like it now, but supply and demand always /find equilibrium. Unfortunately, we may be well into 2024 or even 2025 for many start-up AI companies before supply catches up with demand.

Profiting from the AI Crown Jewel

Claiming your piece of the AI pie can be as simple as investing in the Nasdaq QQQ Trust ETF or buying Nvidia shares.

But we can do better by digging a little deeper, especially considering that Nvidia shares have already rallied more than 250% over the past year.

Here's another thing to consider that we'll talk about in just a moment.

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While Nvidia owns the design and recipe for making the H100 AI crown jewel, they aren't the ones making the actual semiconductor chip. /T_he manufacturing of the chip is outsourced to another, lesser-known company.

/T_he bottom line is I want you to invest in the company responsible for supplying Nvidia with the 550,000 H100 AI GPUs that have already been spoken for this year.

Best of all, while Nvidia receives the fanfare for its AI crown jewel and its shares are already up huge over the past year, the company's mysterious supplier remains under the radar of investors. Its shares are only beginning to make their run.

But before I introduce you to the company responsible for manufacturing the AI crown jewel, I need to tell you a little about their business...

All the Right Ingredients

Nvidia is called a fabless semiconductor company. Other examples of fabless companies are Broadcom, Apple, and Qualcomm.

Fabless semiconductor companies don't actually manufacture their own chips or products. /T_hey hire semiconductor foundries to step in and turn their creative designs into salable and usable products.

Let me explain what I mean.

Imagine you want to bake a bunch of cookies but have two types of bakeries in your town.

A fabless semiconductor company is like a bakery that comes up with delicious cookie recipes but doesn't have a kitchen to bake them. So, they create the recipe and then pound the pavement, looking for someone else to bake the cookies.

A semiconductor foundry is like a bakery with a big, professional kitchen but no unique recipes. /T_hese guys tell the baker with the delicious cookie recipes, we've got ovens! We can bake your cookies!

/T_he fabless company makes the design or 'recipe' for the semiconductor chips, and the foundry actually 'bakes' or manufactures them. One comes up with the idea, and the other makes it a reality.

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It's really that simple.

Now, what exactly is a semiconductor?

In simple terms, it's a material that can conduct electricity under some conditions but not others. /T_his makes it a perfect candidate for creating transistors, the building blocks of all our electronic gadgets.

/T_he foundries take the chip designs - packed with millions or even billions of these transistors - and turn them into a physical reality. It's mind-blowingly intricate work that's done at an almost microscopic level.

/T_hese foundries are essentially high-tech factories, but calling them 'factories' is an understatement.

/T_hese are more like sophisticated labs.

Picture a setting so clean it makes an operating room look like a sandbox. We're talking 'bunny suits,' air /filters, ultra-pure water - the whole nine yards. /T_he labs look more like what you expect at a biotechnology or pharmaceutical company.

My analyst photographed a small, clean room he visited while investigating another semiconductor company…

You can see an engineer dressed in a cleanroom suit, aka a bunny suit, standing at a computer in the back of the room.

Why so many precautions?

Because even a speck of dust can throw a whole production batch o/ff course.



/T_hey're making wafers: thin slices of crystalline silicon material that will later be cut into individual chips.

/T_he foundries layer on di/fferent materials and etch away parts to make circuits based on the blueprints they got from their clients. /T_hose clients are usually 'fabless' companies; they create the designs for these chips but don't have the manufacturing facilities - or 'fabs' - to make them.

Companies like NVIDIA, Qualcomm, Apple, and many others rely on these foundry services.

Alright, so they make chips. Big deal, right?

But here's the kicker: those chips are everywhere and in everything.

Your smartphone? It's got a bunch of them.

/T_hat new car you've been eyeing? It's practically a computer on wheels, thanks to chips.

Renewable energy technologies, medical devices, smart homes, and even your co/ffee maker - they all rely on semiconductors.

Now, why is this so important?

/T_he /first is scalability.

Our tech needs are growing exponentially. We're not just talking phones and laptops anymore. We're talking about cloud computing, AI, machine learning, the Internet of /T_hings, you name it. /T_hese foundries enable tech companies to meet this growing demand by churning out chips at an industrial scale.

/T_he second is innovation.

Because foundries can build chips so e/fficiently, it frees up tech companies to do what they do best: innovate.

Instead of worrying about manufacturing, they can focus on designing better and more e/fficient chips, ultimately driving technological progress.

And lastly, let's talk about economic impact.

/T_he semiconductor industry is a huge job creator and a signi/ficant contributor to the global economy.

According to the Semiconductor Industry Association, the 2023 global semiconductor sales forecast calls for global semiconductor sales to eclipse $575 billion in 2024!

So, the next time you're marveling at some new tech gadget, the latest iteration of an iPhone, or, most exciting of all, the promise of AI, give a little nod to the semiconductor foundries that helped make it all possible. /T_hey're the

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unsung heroes that are shaping our modern world.

Unlocking the AI Crown Jewel

By now, you know Nvidia owns the design to create the AI crown jewel, the H100 GPU.

You also know that while Nvidia is the creative genius behind the technology, they're not the ones that actually make the hardware.

I am excited to introduce you to Taiwan Semiconductor Manufacturing Company Limited (TSM) , the largest and most respected semiconductor foundry.



You need to know that Nvidia is only one of TSM's clients.

Do you love your iPhone, gaming PCs, and your Tesla EV?

If TSM went dark tomorrow, you'd see tech companies crumble, and many of your favorite gadgets and high-tech creations vanish.

/T_hink back to our story of the baker and the cookie recipe above.

Companies like Apple, Nvidia, and Tesla are the popular kids in the tech space. But they all must come crawling to TSM with their fancy chip designs and ask them to please make their silicon dreams a reality.

TSM, playing the part of the tech wizards behind the curtain, takes the designs provided by guys like Nvidia, cooks up the semiconductor magic, and creates the chips that power everything!

/T_he bottom line is that TSM is the sultan of silicon. When demand for Nvidia's AI crown jewel, the H100 GPU, went through the roof, even at up to $40,000 per chip, TSM was called to step up production and help meet demand.

We've embarked on an AI revolution, and in a world increasingly in/fluenced by technology and run by semiconductor chips, TSM holds the keys to the kingdom. And I want you to claim your share of the AI pro/fits today!

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A Fundamentally Stable Monopoly

TSM is currently the only company worldwide that can build Nvidia's H100 GPU. /T_hat gives it a 100% monopoly over this critical piece of the AI puzzle.

Every time Apple, Google, Meta, Tesla, or one of the thousands of AI start-ups place an order for Nvidia's AI crown jewel H100 GPUs, TSM gets richer and richer...

Along with TSM's shareholders.

And I don't see anything slowing down the AI megatrend. /T_his revolution is only beginning to get underway.

But here's the thing, and this is really important…

TSM's company isn't built solely on supplying Nvidia with its H100 GPUs.

Apple, Qualcomm, AMD, Broadcom, MediaTek, Intel, Marvell, NXP, Unisoc, and Nvidia are all huge customers of TSM.

/T_his is a massively diversi/fied company. And as long as semiconductors continue to power our lives, TSM will continue to generate enormous pro/fits!

Let's talk about those pro/fits for a moment...

TSM has delivered an 18% revenue compounded annual growth rate (CAGR) and an 18.6% earnings CAGR since listing its shares in 1994. And they've achieved this incredible growth rate while building and maintaining a fortress-like balance sheet. S&P has an AA- rating on TSM, and Moody's rates the company Aa3.

/T_hose are fantastic scores!

Dividends are another great tool to determine the stability of a company.

TSM started paying a cash dividend in 2004, has remained steadfast in its willingness to return cash to shareholders, and is committed to maintaining that shareholder-friendly policy annually and quarterly.

/T_he secret behind TSM's ability to grow its revenue and earnings, maintain an excellent credit rating, and pay consistent dividends is simple. /T_he company serviced 532 customers and manufactured 12,698 products for various

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applications spanning a variety of end markets in 2022.

TSM is the poster child for artful diversi/fication. It's because of industry-leading diversi/fication like this, along with years of consistently strong earnings compounded annual growth, that I believe TSM has the potential to grow into a $1 trillion giant, just like the company it's building the H100s for, Nvidia!

Everything from high-performance computing and AI applications to smartphones and digital consumer electronics is produced by TSM.

So, the next time you're feeling grateful for the gadget in your hand, the power of your EV, or the potential of AI, tip your hat to the mysterious supplier of these products, TSM.

And while you're at it, buy some shares of TSM so you can share in the profits TSM has consistently grown over the past 29 years.



ACTION TO TAKE:

Buy shares of Taiwan Semiconductor Manufacturing Company Limited (TSM) up to $170 per share.

Our Bright AI Future

As you can see AI is the future.

And the key to making that future a reality is Nvidia's H100 GPU.

TSM has a complete monopoly over supplying Nvidia these crucial crown jewels.

Not only that but they also produce a variety of other essential tech products and service many other companies in the industry.

TSM is an outstanding example of a great play to add to our Arti/ficial Intelligence portfolio.

By investing in this company we're sure to cash in on the AI megatrend.



We're excited about TSM's bright future and we'll continue to keep you updated on important developments as we move forward.

And remember to keep an eye on our full Arti/ficial Intelligence portfolio on our website here.



Sincerely,

Bob Byrne

Senior Analyst, Altucher's Investment Network



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