We recently published a list of Jim Cramer’s Bold Predictions About These 9 Semiconductor Stocks. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against other semiconductor stocks that Jim Cramer has made bold predictions about.
Semiconductor stocks were once again at the forefront of media and investor attention this week during the stock market selloff triggered by investor apprehensions about lower AI development costs courtesy of China’s DeepSeek AI models. Because AI has dominated headlines for more than a year now, most of Cramer’s attention during his morning appearances focused on the technology whether it was before or after the selloff.
Before the selloff, on Friday, the CNBC TV show host started out by discussing the applications of AI. While most of the public’s attention is focused on chatbots, AI’s business use cases are quite diverse. One such use case is in the healthcare industry and another comes through the financial services sector. Cramer commented on both of these:
“I think that what we’re not thinking about, like when I went to Jensen Huang’s panel on healthcare. It’s so much bigger than anything involving AI PC. I mean they’re really just talking about having the data to really attack every single disease and changing it from fatal to maintenance. You have tremendous number of people involved in trying to do that. Then you have Stripe there working with [the GPU company] to be able to do something revolutionary in finance. And then you have the banks working doing some revolutionary things trying to get people who’re doing S1s. . . .”
The DeepSeek AI selloff was notable particularly because of the impact on the shares of Wall Street’s favorite AI GPU company. The firm, which was the world’s most valuable company ahead of the selloff, bled close to $600 billion in market value and lost its top spot to the company behind the iPhone. For Cramer, while the lower AI development costs were commendable, the use cases for the AI GPU firm’s products were beyond large language models:
“Well, look, there’s no doubt about the cost is great for this. But if you’re gonna go forward and you’re gonna do what Jensen was talking about, which is anything physical, anything physical with Blackwell. It’s going to be better than what we do. I’m just saying that Jensen’s on a plane of his own. And that, if you have low commodity, Jensen’s got the three thousand dollar chip that can handle that. Was I shocked by this? No it was nice that they came up with such a low price.”
For semiconductor stocks, one AI-generate catalyst that did not materialize is the AI PC. These PCs use a special chip called a neural processing unit (NPU) along with CPUs and GPUs to run AI tasks. In an appearance before the DeepSeek selloff, Cramer mentioned a Morgan Stanley report that shared that 60% of people surveyed had accidentally bought an AI PC and more than 60% were uncomfortable paying extra for AI products. The report, which added that just 15% of the respondents had bought a new product because of AI was “perhaps the most damming piece” that Cramer had read.
He shared that “There’s absolutely no evidence of a super cycle whatsoever,” and cycled back to enterprise AI use cases by stating “I mean I think AI is very good when you listen to what Jamie Dimon [inaudible] to say, that AI is very good when you listen to what Marc Benioff has to say.”
Cramer added that not only was he wrong about the AI PC cycle as the PC he “thought we were all gonna upgrade. And now we’re all in wait-and-see mode,” but those who he knew had bought such a PC “haven’t used it or there’s a button there and it doesn’t work.”
A close-up of a complex network of integrated circuits used in logic semiconductors.
Our Methodology
To compile our list of Jim Cramer’s bold predictions about stocks, we scanned the stocks he mentioned in Mad Money and Squawk on the Street after September 2024. Then, we picked out semiconductor stocks and ranked them by the number of hedge funds that had bought the shares in Q3 2024.
For these stocks, we also mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds invest in? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders In Q3 2024: 158
Date of Cramer’s Comments: 10-17-24
Performance Since Then: 4%
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the world’s largest contract chip manufacturer. The shares are up by 4% since Cramer’s remarks as the firm has managed to post consistent revenue growth and profit from the rising demand for AI chips. Taiwan Semiconductor Manufacturing (NYSE:TSM)’s shares dipped by 13% during the DeepSeek selloff, after they had gained 5% earlier in the month after contract manufacturer Foxconn reported a jump in revenue due to AI and server demand. Here is what Cramer had said about Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in October:
“… If you didn’t listen to Taiwan Semi’s conference call last night, you missed out on a performance that explains so much of what’s going on in this market, in the world.
“I’m talking about the off-the-charts demand for chips that enable artificial intelligence. Those are almost all manufactured by Taiwan Semi, which is the crucial cog in the semiconductor machine. That’s how you know this move is for real.
“This company is the biggest and the best. Last night was a tour de force show, especially for one customer, Nvidia. They might as well have entitled the conference call in praise of Nvidia because Nvidia is crushing it in partnership with this amazing Taiwanese company. I talk about Nvidia a great deal, but I don’t say much about Taiwan Semi, which is wrong. See, like most American semiconductor companies, Nvidia is actually more of a designer. Taiwan Semi is the company that builds the product.. You can’t have Nvidia without Taiwan Semi.
“How close are they? Let me quote from Doctor C. C. Wei, he’s a PhD and chairman and CEO of Taiwan Semi ‘So one of my key customers said the demand right now is insane.’ Well, the key customer is Nvidia. And like Nvidia’s redoubtable, implacable CEO Jensen Huang, Wei says that the demand for AI chips ‘is real, and I believe it is just the beginning of the demand.
“Bingo. There it is. Unlike ASML, the semiconductor equipment maker that gave you a sob story about the whole industry the other night, with the exception of AI, Taiwan Semi’s focused on the cutting edge of the industry. That’s what they are. They know it because they use it. As Wei said, ‘We have our real experience. We have been using AI and machine learning in our fab and R&D operations. By using AI, we are able to create more value by driving greater productivity, efficiency, speed, qualities.’
“He goes on to explain that Taiwan Semi’s customers would say the same thing. What a contrast to the lame ASML call that caused so many people to sell Nvidia. Panic, panic, and once again revved up the chip obituary machine.”
Overall, TSM ranks 2nd on our list of semiconductor stocks that Jim Cramer has made bold predictions about. While we acknowledge the potential of TSM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TSM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.