Not sure if analysts and estimates already take this into account, but if not, $10 Bn in CHIPS subsidies over next 4 years would change IRR significantly. Just messing around
The bear case would be that their foundry isn't competitive, and that they keep losing market share in their other businesses. Under that scenario, things can go really south. So size your portfolio weight accordingly, never invest more than you are willing to lose. However, overall, I do think the risk-reward is to the upside on this one. A successful foundry business would mean a multi-bagger.
The 70% figure for a hypothetical Nvidia and TSMC IDM's gross margin makes sense if you average their respective margins and weight by market cap. $2T * 0.75 + $500B*0.53 / ($2.5T) = 71%
Not sure if that's a fair way to calculate it though. Please correct me if I'm wrong.
Excellent article, very well structured, detailed, and written!
Wow. Super research and writing!
Not sure if analysts and estimates already take this into account, but if not, $10 Bn in CHIPS subsidies over next 4 years would change IRR significantly. Just messing around
https://docs.google.com/spreadsheets/d/153uIFb9mPFva8Cm3cVEagt0a9fRWsu5ETKeBv_3UYzQ/edit#gid=0
Just did a similar write up on the state of silicon
Would love your thoughts!
https://open.substack.com/pub/matthewharris/p/chips?r=298d1j&utm_medium=ios
Nice work
Appreciate it! Interesting times ahead
Thanks for correction.
Yes that defines the risk
The bear case would be that their foundry isn't competitive, and that they keep losing market share in their other businesses. Under that scenario, things can go really south. So size your portfolio weight accordingly, never invest more than you are willing to lose. However, overall, I do think the risk-reward is to the upside on this one. A successful foundry business would mean a multi-bagger.
What would be your bear case estimate?
Do you mean maximum downside?
The 70% figure for a hypothetical Nvidia and TSMC IDM's gross margin makes sense if you average their respective margins and weight by market cap. $2T * 0.75 + $500B*0.53 / ($2.5T) = 71%
Not sure if that's a fair way to calculate it though. Please correct me if I'm wrong.
You should weigh by revenues i.e. Revenues * gross margin = gross profit