TSMC Slides, Saronic Invests in Texas, GameStop Makes Its Move

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1:42Bloomberg Tech is live from the heart of Silicon Valley with Ed Ludlow in San Francisco. This is Bloomberg Tech. Coming up, U.S. equity markets drop after TSMC's results, topping expectations, but also spending more to meet AI-related demand, including a bigger commitment to its US build-out. Asuronic makes a$3.2 billion bet on Texas. We speak with the CEO of the Autonomous Maritime Drone Company and Texas Governor, Greg Abbott. And later this hour, Ryan Cohen, CEO of GameStop, joins us to discuss the company's bid for eBay, the future of gaming, and a lot more. Chip makers are weighing on technology stocks, stocks broadly.

2:30The concern is AI spending. The catalyst, TSMZ's quarterly results, they actually raised the sales outlook, beat across the board, and then said capital expenditures would be higher, not just this year, but for three years. Now the market's kind of recalculating and saying, are we worried about how much higher spending is going to get and how is it justifying current valuations? These are what the markets look like right now under performance in chip stocks. For what it's worth, TSMC's US-listed shares, the ADRs, they're kind of off-session lows, but we are markedly lower. That takes us to today's big number,$265 billion.

3:10That's the total value of TSMC's planned US investment after the chipmaker added another $100 billion for just four new semiconductor fabs. Bloomberg Senior Tech Editor Mike Shepard has more. $100 billion is a lot more, but it's for just four fabs. That's the reality of the economics of building out infrastructure. What do we need to know about this? Well, Ed, this is a number that has been in circulation since the beginning of the year when TSMC indicated to the U.S. that it would be building those four additional plants, bringing the total plan for Arizona to 10 fabs plus two packaging plants over an indeterminate amount of time.

3:52It takes a long time to construct these facilities and really an even longer time to actually start production and delivering. They began production at the four nanometer process level back in 2024. And the three nanometer process level at a second fab outside Phoenix is only to be ready next year. So we are talking, Ed, in more geological terms in terms of time than something immediate and around the corner. But it is a huge commitment, and it was driven in part by the Trump administration's pressure on Taiwan with tariffs. At the beginning of last year, TSMC had pledged to increase a$65 billion investment agreed to under President Joe Biden to$165 billion soon after Trump took office.

4:37But that clearly wasn't enough. And we saw them step forward with this commitment under the pressure of tariffs to add another$100 billion to it. That's the bit I'm kind of interested in, right? There's a lot of focus on bigger numbers. Sometimes numbers get bigger because the environment is more expensive, right? Inflation on the labor, construction, materials side. Did TSMC tell us anything more about why they're bullish on America? Well, in part because if you look back at CEO CC Way's comments back in June, he is saying that it will take years to meet all the demand for chips that his company makes from U.S.

5:17customers. And that's really true across the board. You also heard that in your conversations with the CEO of SK Hynek saying that, look, the memory shortage is real and it will be here through 2030. And that is because of the unprecedented demand created by the AI boom. There is so much need for chips and processors to go into all those AI data centers being built across the U.S. and elsewhere in the world. And that's on top of already existing demand for other consumer devices and products. And all of those chips need to be made someplace. TSMC is looking to diversify geographically out of Taiwan, where it principally makes most of its products.

5:58And it wants to put more of it here in the U.S., in part as a hedge geopolitically, in part also because, yes, it does need to serve the U.S. customer base more. and also recognize that the political pressure here in Washington to expand and invest not only in Taiwan, but other major economies is very strong yet. Bloomberg's Mike Shepard, thank you very much. Let's get more on TSMC's results and bring in Tammy Chu, Berenberg's head of tech equity research. TSMC hiked its sales outlook, but also boosted its spending plans. For you, Tammy, which was the more important metric? so from a semi-equipment company perspective in my view both are important because reason being is normally a good idea to say semi-equipment companies will benefit from the strong capex of tsmc where they raised already twice in this year but at the same time we do want to see that tsmc is doing well for their own business to be able to support the higher capex spending level for longer.

6:58TSMC called today that the AI industry is new and demand will go all the way into 2029, 2030, which is a positive sign, in my view, for the semi-equalment industry. Tammy, we're going to get to ASML in just a moment, pretty much the critical key chip equipment name. But the reaction of US equity markets to TSMC saying not just this year spending will be higher, but over a number of years, it's kind of raised the expectation for the capex environment overall. In the near term, stocks are down because of that. Why is that a negative in the first instance? In our view, the semi-equipment and also TSMC share price has been down after that massive announcement, despite the revenue upgrade, etc.

7:47because they all did well over the past two months, and the investor expectation has been increasing dramatically. So, in our view, it's just to take a brief. And also, at the same time, the news flow from the memory sector has been a bit volatile from a share price perspective, which is also adding pressure to the very popular AI trade. So, in our view, it would just be a short-term profit-taking instead of anything fundamentally went wrong. Let's go to ASML. We didn't have a show on Tuesday and Wednesday of this week because of Fed Chair Walsh's testimony. But ASML also lifted its annual sales forecast for the second time this year and said it is going to expand its own capacity.

8:32And how that manifests is a greater number of units on the low NA and high NA side. Just your overall reaction to what ASML said. as most earning yesterday has been amazing in terms of how they revised up the full year guidance for the second time this year as you suggested besides the revenue i would point out asmo also revised up the gross margin expectation for this year from midpoint 52 percent to midpoint 55 percent which all suggesting that asmo is seeing incremental demand coming from their customers and customers just need more capacity over time. So therefore, from my perspective, I believe that ASML has been showing, based on their numbers, that the whole AI investment, CapEx expansion, capacity addition is not coming to an end at any time.

9:23And the share price move of yesterday from ASML's side is very similar to the logic of TSMC. The share price has done really well over the past three months. Expectation has been high. So we are taking a little pause, but we do believe that the results yesterday of ASML has been very strong and showing the level of customer spending is only going up. ASML is in a position where there's essentially a backlog, right? Orders are queued up all the way to 2028. We've spent a lot of time recently on the show thinking in the context of memory chips about the historic boom and bust cycles. the cyclical nature of those.

10:07How does ASML manage that on its critical machines across logic and memory, right? You know, it has a backlog, it wants to increase capacity, but in the end, what happens if the demand tapers off or falls away? So from ASML perspective, they are normally very, very cautious when they are adding capacity or committing to adding more capacity, because none of the equipment company want to drag on those empty capacity through the downturn, as you suggested. So we believe that ASML has been talking with customers on the very frequent basis to understand what's the real demand of the customers and try to understand what's the end market driver for those before they build capacity.

10:48And, of course, they have to balance the demand from both logic and memory customers. And we do believe that at this point of time, they are treating both of the sector as super growthy, part of the cycle. Therefore, they have been building for both of them instead of trying to select which customer they want to serve first. We are in the environment that every component in this AI supply chain is under shortage. So therefore, we believe that ASML has been speaking to customers, understand the role requirements, and building for both of the sectors in order to fulfill more incremental demand in the coming years.

11:25We were just showing ASML's top customers, unsurprisingly, TSMC, Samsung, Intel. But I was looking at the 2Q net system sales by region as well. Most of this equipment is going to South Korea, then Taiwan, 30 % to Taiwan, but only 9 % to the US. We started this show talking about TSMC's increased commitment to the United States. Do you expect over time more ASML equipment to come here to America? Yes, because their regional sales on a quarterly basis can be lumpy, depending on which customer will receive more shipment in this year. With Samsung further expanding their fabs in the U.S., with TSMC expanding further in the U.S.

12:09with incremental commitment, we do believe that U.S. sales will increase on a quarterly basis going forward. But the pattern can be lumpy, which doesn't really suggest that TSMC or other players is pausing their investment in the U.S. It's just lumpiness of the factor of the equipment, given that ASML's equipment is sold for more than 200 million per equipment. So therefore, who receives what really moves the quarterly trend. Tammy Chu, Berenberg's head of tech research. Great to have you back on Bloomberg Tech. Thank you very much. As the AI world gears up for a big earnings season, one of the industry's key figures was spotted enjoying pork skewers in Tokyo.

12:49NVIDIA CEO Jensen Wang enjoyed the finger food alongside Japanese suppliers to court their support for the AI supply chain. Those present included executives of companies like Kyokusha and Tokyo Electron, both of which supply essential components for NVIDIA's AI systems. Not only that, Japan is planning to purchase 27 ,500 next generation Rubin chips to build an AI for robots. Okay, coming up, Saronic makes a$3.2 billion bet on Texas. We speak with Dino Mavrucas, Saronic CEO and Texas Governor Greg Abbott. This is Bloomberg Tech.

13:41Texas is quickly becoming the epicenter of America's next industrial build-out. From AI data centers and semiconductor fabs to defense technology. Now, autonomous shipbuilder Saronic is making its own major bet on the state. The company's announced a$3.2 billion investment building a next-gen shipyard at the port of Brownsville, manufacturing medium-to-large-class autonomous surface vessels. Joining us now for an exclusive conversation are Saronic CEO Dino Mavrucas and Texas Governor Greg Abbott alongside our Bloomberg Texas Bureau Chief Julie Fine. Governor Abbott, good morning to you from San Francisco.

14:17Hey, good morning. If we could, I'd like to start with a sort of operational update, please, on the flooding situation in your state. I know it's something that you want to communicate on. Sure. Listen, well, thank you for offering that up. We've been following all day. Yesterday, all last night and today, the massive flooding going on in central and south Texas. It's the same area where we had the massive 4th of July flooding last year. The difference this year is we're actually getting more rain over the past 20 hours and over the next 24 hours than we got last year. overnight there was one life lost.

14:55We are continuing to surge resources. We've made almost 80 rescues already. I will be leaving here after this interview to go focus on our current response in regions ranging from the Kerrville area all the way down to Uvalde, to Del Rio, to Laredo, where we expect continued flooding. I just want to make sure that all Texans know that we have more than 1 ,300 Texas personnel, the National Guard, Texas Department of Public Safety. We have all resources, boats, helicopters available to make sure that we will be doing everything possible to save human life. Governor Abbott, I just want to follow on that briefly.

15:35As you remember, just a horrible time last year when there was that flooding in the same area. your advice to anybody in the area that sees this water that is concerned? What should they do and where should they go? So great, great question. And you all are one of the best communicators to the general public that we can have out there with the news media sharing this, what I'm about to tell you, and that is there are rapidly rising rivers that will continue to rise through the remainder of today and tomorrow. If you do not need to be out, don't go out. We have one leading reason why people may lose their life in rising waters like this is because people drive into waterways and get swept away.

16:21There's an old saying, turn around, don't drown. And that applies here. Second, because rivers are rising so rapidly, if you are near a river, try to get away from that river so you can protect your own life. Each individual in the state of Texas has the full capability of protecting and saving their own life right now by staying away from the rising rivers and not driving into it. Governor Abbott, thank you very much for that. As a reminder to the Bloomberg Tech audience, Saronic, a defense tech startup focused on autonomous maritime drones, investing$3.2 billion in the state of Texas, a facility at the Port of Brownsville.

17:00Dino Mavrucas, Saronic CEO, welcome back to Bloomberg Tech. The question we get most often is often the simple one. Why Texas? What did Texas do to win your business? Before I even talk about that, I just want to say our thoughts and prayers go out to everybody involved in the flooding. Saronic keeps that very, very front of mind. And we're very proud to call Texas home and invest in the community here. So, Governor, if there's anything that we can do to support, please let us know. Sure. Thank you. Texas is a great state. I mean, the leadership and the partnership with the governor, we're building a next generation shipyard.

17:39We're going to go and build the most advanced, most efficient, highest throughput shipyard, not only in the country, but in the world. So when you're doing that, you're looking for land availability. You're looking for deep water access. Those things are kind of binary. You either have them or you don't. What really tipped the scales was the workforce, the people down in Brownsville that we're going to build this company and this project around. And then the partnership with the state and local government. It's the governor's leadership and support, the partnership with the state, Cameron County and the city and the port of Brownsville that help bring this generational project to life.

18:17do you know brownsville close proximity to spacex so that was interesting that the workforce was was was the tipping point how competitive is it in in your industry right now in hiring the best people across lots of different disciplines i think what you're seeing it's actually more collaborative than it's competitive you're building up industry you're building up infrastructure you're investing in the community when you look at what we're going to do in Brownsville. We're going to invest billions of dollars, not just into infrastructure, but into the local region. We're going to create 10 ,000 jobs and we're going to create$160 billion of economic impact in the region.

18:58And that's just over the next 10 years, right? With companies like SpaceX and others doing that, it creates an entire ecosystem, not only in that part of the state, but in the entire state. Governor Abbott, we just heard Dino talk about the workforce. Again, that's 10 ,000 jobs. So I'd like to hear about the plans on how you plan to develop that workforce to make sure there are enough people available. I'll tell you this, Texas ranks number one in the United States for having the best workforce. Texas ranks number one for adding more new jobs than any other state. And there's reasons for that.

19:33And that's because we work more than any other state to make sure we have the best trained and qualified workforce. We have these massive education programs across the state. One is through the Texas State Technical College, two is through our two-year colleges, but three is through our universities. And we focus our education in Texas on real-life job skills that will ensure that when a student graduates or completes the course study there, they're going to be ready to go straight into the workforce. And we talked to Dino, we talked to Saronic about what our capabilities are to make sure that we would be able to develop the workforce they need.

20:12This is exactly what Elon Musk found with regard to SpaceX. It's what other companies that are coming to the state of Texas are realizing. I talk to these CEOs all the time that are coming to the state of Texas, and they tell me the leading reason why they're coming to the state is because we do have that pipeline of well-trained workforce, and we will be able to deliver it for Cerronic, just like we have been for all these other companies, where Texas now is home to more Fortune 500 company headquarters than any other state because, in part, of the workforce and supply that we have. Governor Abbott, when you look down the road five years, what does the Rio Grande Valley look like with this addition?

20:53So it has changed dramatically. You're familiar with it. Maybe many Americans watching this show may not be familiar with it. But listen, the Rio Grande Valley has historically have been an agricultural region and things like that. But when you look at some changes taking place, you know, you mentioned one, obviously, with Starbase down there in Cameron County, which is near the Brownsville area, with Saronic, which is going to be near the Brownsville area. It's a massive explosion of economic activity. And because of that, kind of going back to the education component, what our universities are doing, Our universities are establishing campuses and expanding campuses in those regions to make sure that we will be educating students, not just to be able to go to work for Saronic, but also to fill the other education needs in the entire area.

21:41But going back, now the Cameron County area where this project is going to be located is going to be one of the fastest growing regions in the entire state. So we're building out transportation facilities, other facilities to make sure this is going to be a thriving community. But it also shows how Texas is the most diversified economy in the United States, not just with regard to different business sectors, but geographically in the state. Obviously, we have the booming Dallas and Austin and Houston areas, but now we have the booming real grand area. And so our state is absolutely booming. We cannot be more proud to have Saronic down there and the jobs they're providing.

22:23So, again, this real quick number. Over the course of the coming years, Saronic is going to be adding more than or up to at least 10 ,000 new jobs at$75 ,000 per job at least. When you put it all together, they're going to be injecting$750 million in paychecks for our fellow Texans. That's going to make a massive difference in our state. Dino, we're going to put up... Dino, let me just jump in because there's another big moment this week for you. CENTCOM sharing this video. The first combat use of autonomous surface vessels by the U.S. military, your technology. What was the biggest lesson from that operation?

23:06I mean, it's delivering the capabilities to our warfighters at speed and scale. That's what Ceronic has been based around since the day we founded the company. We looked around and we said, what is the capability that our Navy is missing? And how do we build that fast and get that to our warfighters to deliver real combat power? And that's actually exactly what we're doing in Brownsville as well. There's a shipbuilding crisis in this country right now. China outbuilds us 230 to 1. Our naval fleet is actually shrinking. We have 0.1 % of global shipbuilding capacity. Port Alpha is going to turn all of that around.

23:46On day one, our initial phase of the project, this will be the largest shipyard in the country. We will have 150 ,000 gross tons of shipbuilding capacity, which means we will 1.5x the commercial shipbuilding capacity in the United States. And that's just phase one. We're going to take that all the way up to 2 million gross tons of capacity, 20xing the current capacity in this country. And that's what we need. And in Brownsville, what you're going to see is the development of with SpaceX already being there. It's just going to become a critical corridor, not just for business and commerce, but for national security.

24:25Dino, we just have about 60 seconds left in the program. You said this is phase one. Would you just give us a look into the future in phase two? Absolutely. So basing the initial phase of the project on 835 acres, we talked about massive land availability. We have the ability to expand up to and over 4 ,000 acres. We're going to continue to invest, continue to build out infrastructure. And keep in mind, we are building a brand new shipyard. This is built from the ground up to be the most advanced, to be the most efficient. But most importantly, add net new capacity, brand new shipbuilding capabilities to this country in a way that we haven't seen since World War II.

25:10Texas Governor Greg Abbott, Saronic CEO, Dina Mavrukas, of course, our Texas Bureau Chief, Julie Fine. Really appreciate all of your time this morning. Again, Saronic, a$3.2 billion commitment to South Texas. Coming up here on Bloomberg Tech, Ryan Cohen, the GameStop CEO, joins us to discuss his and GameStop's bid for eBay. We're going to talk about the future of gaming. We're going to talk about the future of a lot of things. This is what markets look like right now. We are down and it is chip stocks, semiconductors really weighing on the technology sector. TSMC, the world's biggest chip manufacturer, raised its sales outlook.

25:51It beat across the board, but it also said spending will be higher, not just this year by the$8 billion, but in aggregate over a number of years. So the market's taking that commentary on the higher spending environment and is now a little worried about it. The higher spending, does it justify the valuations of some of these companies? We're halfway through the program. We have a very big conversation coming up next. do not go far. From San Francisco, this is Bloomberg Tech.

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