TSMC Forecast Lifts Peers on Robust AI Demand

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1:30Bloomberg Tech is live from coast to coast. With Caroline Hyde in New York and Ed Lovellow in San Francisco. This is Bloomberg Tech. Coming up, TSMC posts a strong forecast and results lifting peers, a sign that demand related to AI remains robust. This is OpenAI focuses on its infrastructure, striking a deal with Cerebrus for compute and hunting for hardware partners across data centers and consumer devices. And the mayor of New York City is suing a delivery tech company, accusing it of breaking local worker protection laws. We'll get into that in a moment, but first we check in on where the markets are.

2:07And actually, we're managing to rally in the Nasdaq 100 after two days of losses. It's all about that TSMC headline that you were just discussing, Ed, and the rejuvenation in maybe wading back into these key AI names. Nvidia, indeed, one of the key points rides is higher. Bitcoin, though, not feeling much of the love. There's also a delay to a key Senate markup on the market structure bill, so that's putting some pressure on the ecosystem more generally. But watch for crypto. But you're looking at TSMC. Yeah, the world's most important chip contract manufacturer telling us capital expenditures up to 56 billion this year.

2:42Top line growth's 30 percent. Two markers that the AI demand is intact. But ASML, the most important chip equipment making machine making name, first European company in a long time to breach$500 billion of market value shares trading at a record high. Why? Because TSMC is the number one buyer of its gear. There's a lot to get into. Let's get to it. With Bloomberg's Peter Elstrom out in London, this TSMC forecast, it's big. It's big for markets. It's big for the industry. It's big for AI. Very interesting, though, to listen to CC Way give a note of caution on how deploying that capital carefully is important.

3:21Yeah, that's right. The earnings report from TSMC was very, very strong. As you said, they forecast that revenue is going to be up close to 30 percent this year. As you mentioned, they're boosting their CapEx outlook, too. It's going up more than 35 percent at the high end of that range, up to$56 billion. As you say, that's from$40.9 billion last year. So it's a big boost. It's very clear who's going to benefit from this. As you mentioned, ASML is one of the big beneficiaries. Its shares were up to a record today. Applied Materials up today to a record. KLA is also up to a record. so you see that these chip equipment makers are definitely benefiting from this.

3:58But as you suggested, C.C. Way and McCall afterwards was not exuberant about this. He was not reassuring in all respects about the AI trade. Somebody asked him directly, do you think that we're in an AI bubble at this point? And he said, yes, you're asking us whether the AI demand is real. So beyond the capital spending is demand on the other side. He said, I'm very nervous about this. He said, we're investing$52 to$56 billion. dollars. If we don't do it carefully, there could be a big disaster for TSMC. Just to be clear, TSMC is the one that's spending tens of billions of dollars for these new fabs that are going to come online two or three years down the line.

4:34NVIDIA is not doing that. NVIDIA is just buying chips from them. As is Apple and makes its chips via TSMC, one of its biggest revenue drivers, and is also trying to steer us as to where the memory story goes as well. Peter, how did you hear about whether or not that's going to impact high-end phones at least. You touched on a very important point. There has been a shortage of memory chips, especially for some of these consumer electronics, smartphones and the like. That's partly because there's so much demand for the AI to pair the memory chips with AI that that's squeezing up a lot of the capacity that's out there from Samsung and SK Hynix and Micron in particular, so that's driving up prices.

5:12CC Wei was asked about that. He said that he He thinks it's going to be manageable going forward. That is a big issue, though, especially for smartphones and consumer electronics. Peter, a lead edge chip fab is a fixed cost,$15 to$25 billion. It takes several years to come online. And you can't know what the demand will be when it does come online, right? No one has a crystal ball. But a part of this is geopolitics. TSMC is at the heart of trade talks between the U.S. and Taiwan and is under pressure to put more capacity in this country, the United States. Yeah, you're touching on a very important point.

5:46Maybe let's start with the company challenge here. Historically, TSMC has done all of its important manufacturing in Taiwan. It's easier. It's a very contained location where their engineers can share intelligence across the country, across the island. And now they're trying to also build in the United States and they're building more and more fabs. So right now, the U.S. and Taiwanese officials are talking about a trade deal that would lower some of the tariffs for Taiwanese goods going into the United States. As part of that deal, we understand that TSMC will probably step up its investments in the United States.

6:20They're talking about adding four or five fabs on top of the existing ones that they already plan to build. So TSMC has said we don't want to do our most cutting-edge chips in the United States, but they are increasing capacity there. that'll be part of this deal we anticipate that could come out publicly over the next week or so. Bloomberg's Peter Elstrom, thanks so much for the breakdown. Let's turn our attention to New York City mayor now, Soran Mamdani. He's keeping his promise on focusing on better working conditions and pay for food delivery drivers. Now, the city is accusing DoorDash and Uber of depriving workers of more than$550 million in tips due to changes in their apps.

6:55But NYC is even looking to shut down a company called Motoclick. a behind-the-scenes delivery tech company that works with these big platforms, accusing it of breaking local worker protection laws. Lumex Miles-Miller has the latest, and Motoclick is the focus for you. What's it been up to? Yeah, according to the mayor's office, Motoclick has not been paying the required minimum wage rate and has been deducting cancelled and refund orders directly from these workers' paychecks. The city filing a lawsuit in a state Supreme Court here in New York City and say that these practices left some of these couriers owing money to the company.

7:36And they say that they work with Uber and Grubhub and DoorDash. What is central here is that this is the new focus of the new mayor. Primely focused on the gig economy and food and delivery tech and really making sure that these new laws that protect these workers, whether it be wages, whether it be other fairness issues, are top of mind and front and center. That is what he is announcing today. And he is putting the onus on these companies doing really an education campaign to make sure that these companies know how they should protect their workers. What we know is that this company, in particular Motoplick, integrates their point-of-service program or point-of-sale programs to generate orders from photographs of receipts, really the last mile of that delivery until it gets to your home.

8:31We know that this is really a focus of the mayor's office because he's appointed a former head of the enforcement division of the FTC, as well as Julie Hsu, the former labor commissioner, and he's been labor secretary for President Biden. And he's also getting a lot of advice from Lena Kahn, of course, brand the FTC and was very critical of fees and more importantly, the fees of these kind of companies and what they do. Miles Miller, thank you very much. And Caro, you know, you and I have reflected on this story in the last couple of days that the main thing the audience needs to know is that come January 26th in that state or city, at least, there is new laws.

9:13It's codified the set of rules that protect the issue that Mars has just been outlining. Yeah, Motoclick is one issue and quite a significant step that even a city would look to shut a company down. But also what's been reported on is the fact that DoorDash and Uber make changes to their own apps. And when you pay a tip, many would say it's rational to pay the tip after the service. But it's meant that those tips have come way down for some of these drivers. And they're being accused of costing drivers about$550 million in tips. So something that they're going to have to navigate and narrate as the story continues.

9:45We asked, what would New York's new mayor do with the tech industry? This is the sort of early play of what his intentions are. Now, coming up on Bloomberg Tech, OpenAI ramps up its real-world ambitions, looking to shore up U.S. hardware supply chains for future devices. We have more on that next. This is Bloomberg Tech.

10:05OpenAI, well, it's looking to bolster its U.S. hardware supply chain. This company looks to find partners for its push into consumer devices, into robotics, and also, of course, into data centers. And the ChatGP team maker has put out requests for proposals from various component companies in the United States. New Meg Seth Fiegeman, who covers OpenAI, joins us some more. This is about a local supply chain, but this is all about signaling where the future revenue is going to be coming from for the company, right? It's true. Some of this is in keeping with the data center expansion that we've, of course, talked about before.

10:34But the idea of getting into robotics and supply chains for that is a little bit of a new development here. we know that OpenAI has made some key hires on the robotics front. They haven't really said too much about it in recent months. And this is the first real signal in a while that they're serious about it and serious about focusing manufacturing for it in the U.S. Now, I will say what's interesting is there's the hardware element of it, but also they're focusing a lot on the software and building the brains behind these AI robots. Are we looking for clues, Seth, of what a consumer-facing device looks like from OpenAI, what form factor is?

11:08as far as I can tell, we're still a little bit in the dark there. I think we are. And to be honest, it feels like OpenAI might also still be a little bit in the dark here. I mean, the last remarks that we heard from Johnny Ive since his company was acquired by them is that there's a dozen or more different design possibilities here for it. And he's almost overwhelmed by the different possibilities here. But it seems like it might be a subtle device. I think most folks are expecting something in the next year. Bloomberg, Seth Figgerman, who's our AI editor leading the team there. Thank you so much.

11:36Let's stay with OpenAI. The company has signed a multi-year hardware deal with Cerebrus, giving OpenAI access to 750 megawatts of computing power. According to sources, the agreement is valued at more than$10 billion and would expand OpenAI's efforts in AI infrastructure build-out. Let's get to Bloomberg's senior tech editor, Mike Shepard. Mike, what do we need to know? Well, this is just the latest massive data center deal that OpenAI has inked over the past year. In 2025, we saw them sign a 10 gigawatt deal with NVIDIA valued at roughly$100 billion and a 6 gigawatt deal with AMD. So this is just another instance of them looking for more hardware suppliers.

12:19And it's just another sign that the demand for infrastructure is still there, especially on the hyperscaler side. For Cerebrus, this is a big moment. This is the deal that the CEO, Andrew Feldman, who has been on this program before, says we'll launch the company into the big leagues. They say that their technology runs as quickly and more efficiently than NVIDIA's, and they are really trying to challenge the market leader in this space for AI chips and AI hardware. And what they're looking to do now is perhaps expand on that. And the company is also in talks for a capital raise of as much as$1 billion that would take their total valuation to$22 billion.

13:01Now, this deal is not complete on the raise, but it certainly is drawing more attention to a company that is trying to establish itself as a real market competitor to AMD and NVIDIA in this area of AI chips. Bloomberg's Mike Shepard, thank you very much. There's many more news stories out there today in the world of tech. Caro? There are. It's time now for Talking Tech. Ed, first up, Alibaba is looking to unify its various services in its AI app, Quen. The company is looking to connect the likes of Taobao, Alipay, Fliggy to the Quen app, offering users just one single platform to shop, to book travel, to pay for services with the help of AI.

13:40Plus Amazon, well, it's challenging Saks' Chapter 11 filing, claiming the luxury retailer breached a deal tied to selling Saks products on Amazon and that its equity stake is now presumptively worthless. Saks is seeking court approval to access as much as$1.75 billion in financing to pay vendors, payroll and other expenses. And Elon Musk's XAI, well, it's disabled the ability for users to generate sexualized images of real people using its GROC AI chatbot. In a post on X, the company says it has, quote, zero tolerance for any forms of child sexual exploitation, non-consensual nudity and unwanted sexual content.

14:17The changes apply to all users on X when using GROC and they include premium subscribers. Ed. Okay, coming up, a grid operator cuts its power demand forecast, offering a reality check to the AI boom. That conversation's next. This is Bloomberg Tech.

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16:40The biggest grid operator in the US, PJM Interconnection, cut its power demand forecast for summer 2027 by more than 2 % to about 160 gigawatts. That may seem surprising, given that big cloud providers and AI firms keep talking up their need for electricity. And even more so when you consider that PJM manages the region, which includes data center-heavy Northern Virginia. So what does all this mean? Let's bring in Mehdi Pariyavi, CEO of the Washington, D.C.-based International Data Center Authority, a think tank, but also global advisor on data centers. This data set is really important. Throughout industry, a lot of people have said, keep watching it.

17:20But what it indicates is that there is a big difference, right, Mehdi, between those projects announced on data center capacity and those that are actually being built and those that are actually utilizing electricity, not just contracted for it. What do you make of it? Yes, we see this happening all the time. What's announced is usually very different from what's actually planned and deployed. So reports need to rely on planned projections, not announced projections. And, you know, this report doesn't really relate to the actual reality of the data industry for simple reasons. First of all, the 164 gigawatts deviation to 160 gigawatts is just a 2.4 % drop.

18:12And the way power companies work, they try to double the projected average, and this is not a significant drop in terms of power projection. However, the fact that the data industry is actually growing, not by any ways diminishing, is because of the fact that data centers are not just bottlenecked by power, but also by water, by connectivity, by human capital, by policy, taxation, and so many other reasons. That's why, for example, workforce, there is simply not enough people out there to run data centers. But the most important reasons that this report could be misleading is two reasons. First, chip maturity, because chips are evolving so fast that it became so difficult for data center owners and operators to build day centers fast enough before they become obsolete.

19:02It usually takes 24 months to build a day center and just we're changing monthly on a monthly basis practically. But in 2026, we're predicting that a lot of maturity and clarity will be provided. How valuable is this data, right? Because what PGM does is tell us their forecast for the next five years, summertime peak demand, wintertime peak demand. And then they tell us that by 2035, they expect that demand forecast to keep growing. That's quite a long time horizon. Yeah, but one of the main reasons that I don't find this report too relevant is because it's totally ignoring on-site power generation.

19:38Because of the slow development of the power companies and them meeting the demand needs of the days of the operators, a lot of days of companies are reverting to on-site power generation. If you want to grab a gas turbine, you can't find anything in the market today. Everything is backlogged. So a lot of people are reverting to on-site power generation, whether it's gas, solar, other means, hydro, including SMRs. This report totally dismisses the fact that a lot of the central industries are relying on on-site power generation and not on the grid. And that's why you really can't depend on the report.

20:15Many have seen caterpillars stop, go way high because people have been trying to bring on local power generation in this way. But you talk about SMRs. They're not really out there in the field yet. I mean, that's something that we factor in at least in five years' time, right? Yeah. I mean, the maturity process, you know, governance, everything. Outside of the country, nuclear is becoming very popular. United Arab Emirates, for example, is a nuclear country. They're building day centers at gigawatt capacities. So when you look at the world map, nuclear in general is becoming the solution to go to for data centers, and SMRs for outside power generation are the way to go.

20:59But in the meantime, there's a transitional fuel, which is natural gas, which everybody is relying on. And that is totally being dismissed in most findings and most reports. So the projections of power companies trying to provide electricity on the grid doesn't really reflect the reality of the data center industry growth. We're going from 60 gigawatts to 300 gigawatt capacity in just five years. And that's not even a very optimistic expectation of the market. It's a very conservative projection because looking at a company like NVIDIA where chips and the development of AI is totally blocked and bottlenecked by the development and speed of growth of data centers, you will see that there is no other option where companies like NVIDIA are hunting for data center power so that they can sell more chips.

21:53Can I get this straight then? You think that ultimately this power provider is underestimating how much power we're going to be needing in five years' time? It's totally underestimated, definitely. It's totally underestimated. So what does that mean for the consumer? You are someone who goes around and advises governments worldwide about what to do in terms of getting their data centers online. What does that mean in terms of power prices to the everyday consumer? The only way countries can keep up with this is either you need to stop technology from growth, which is not possible, or every day is touched by data centers and AI and the evolution of technology.

22:28This interview wouldn't be possible, the flights. Everything around us is only possible through technology and ultimately through data centers. So you cannot stop that. What you need to do at the national level, government level, you need to make sure that you're provisioning enough power to your people, to your citizens. You don't burden your citizens by the cost of electricity, by making sure that you're not just sitting around letting the market drive things. You need to make sure that you're always ahead of the game. Unfortunately, governments aren't as informed as they should be. So that's a major task for us when we advise governments.

23:00Meri Paravi, we thank you for your time. CEO of International Data Center Authority, a pretty busy man right now. Let's stick with ultimately that story about power grids, by PJM about their outlook for the forecast and bringing Bloomberg's Noreen Malik, who's been writing up all about this for the un, well, unbathed in deep knowledge of power and how it works here in the United States. Is the outlook of 160 the right one, do you think? How do they come to these sorts of numbers? Yeah, just to quickly put context, power demand has been so like flat in PJM that they still haven't touched the all-time record that was hit in 2006, which is 165 gigawatts, and they won't get there until 2028.

23:44So this pullback now for next year for of about nearly four gigawatts, that's a lot. That's four nuclear reactors worth of power supply. And so I think what PJM is trying to do, this is an industry that is overwhelmed with so many requests to build power plant data centers that can consume as much power as cities. This is all being passed on to consumers. So they're trying to find out what's actually happening and on what timeline. And this is specifically for next year. But then and that will affect consumers prices because they had a shortfall of nearly six gigawatts in the capacity auction.

24:21So now that shortfall is smaller. So it has direct costs in consumers. I think longer term what you're hearing is right, like those numbers are going to change a lot. We might see a hockey stick type of momentum here. Right. Noreen, real quick, the reason that this data kind of piques the interest is that PGM goes back and only includes projects that will take some load that they think are actually going to be real and be built. Just explain the methodology they use. Yeah, this is actually a new methodology. They have historically not had that much insight into what's happening on the demand side, they usually look at power generation.