Taiwan is important to both men: China’s President Xi Jinping and Nvidia CEO Jensen Huang. Getty Images / bigtunaonline, SOPA Images, Xinhua News Agency, Manuel Augusto Moreno
The core business of the technology company Nvidia consists of the development of graphics processing units (GPUs). This requires the chips from the Taiwanese company TSMC.
But such a close partnership harbors one risk above all: Taiwan. Because China does not recognize Taiwan as an independent state, but sees it as part of its own territory.
We spoke to financial expert Tobias Basse, analyst at Norddeutsche Landesbank, about the risk for the AI sector and the semiconductor industry.
Probably no other stock has been as hyped in the past as that of the company Nvidia. The stock has risen 227 percent over the past year. In the past six months alone, the value has doubled. The Nvidia course knows only one direction: up.
Here’s how Nvidia stock has performed for a year. Google screenshot
The latest quarterly figures also brought good news: Compared to the previous year, the US chip manufacturer increased its profit tenfold to 6.2 billion dollars. Why is Nvidia doing so well?
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The core business of the technology company consists of the development of graphics processing units (GPUs). These chips are not only used as graphics cards for PC and console games, but are also used in areas such as data centers, cloud computing, autonomous vehicles and artificial intelligence (AI). The latter in particular is currently being hyped, which is also pushing up the Nvidia share price.
Nvidia-Chef Jen-Hsun Huang. AP Photo / Paul Sakuma
Why Taiwan poses a risk for the AI industry
One of the US group’s most important partnerships is with Taiwan Semiconductor Manufacturing Company (TSMC). Although Nvidia designs its chips, the actual manufacturing is done at TSMC. This company is the world‘s leading contract manufacturer of semiconductors, which are the basic material for the chips. But such a close partnership harbors one risk above all: Taiwan.
Because China does not recognize Taiwan as an independent state, but sees it as part of its own territory and is pursuing the takeover. At the same time, Taiwan has a democratic government and identifies as its own nation. The threats from China’s President Xi Jinping and the constant military presence put constant pressure on the country. This geopolitical risk that Taiwan can be taken also poses a high risk for the local economy, which investors in particular should be aware of.
We spoke to financial expert Tobias Basse, analyst at Norddeutsche Landesbank, about the risks for the AI sector and the semiconductor industry.
Taiwan’s semiconductor industry is of “great importance” to the West
Most market participants are currently hoping for a solution to the Taiwan conflict without a major military confrontation. Nevertheless, even a “rather limited crisis” could have significant negative effects on the global economy, according to Basse.
Will Taiwan besitzen: China-Chef Xi Jinping. picture alliance/Xinhua/Li Xueren