Taiwan Semiconductor Manufacturing Company

South Africa’s largest primary real estate investment trust (REIT) listed on the JSE. It is an international property company with assets in South Africa, the rest of Africa, Australia, Poland and Romania. 

“[Our global directly-managed equity portfolios] have low exposure to semiconductors, primarily through TSMC. This reflects a deliberate view on the supply cycle for semiconductors.

The AI semiconductor trade has been principally driven by the memory segment, which has benefited from an aggressive supply/demand imbalance, allowing producers to push through substantial price increases. Memory’s share of hyperscaler capital expenditure (capex) has inflected dramatically upward, a dynamic illustrated below.

However, all the major memory producers (Micron, SK Hynix, and Samsung Electronics) are materially expanding capacity. CXMT, the leading Chinese DRAM (memory chip) manufacturer, is planning an IPO alongside significant incremental capex. We find it historically implausible that a shortage of this magnitude will not eventually give way to oversupply. The scale of the current semiconductor buildout relative to other capital-intensive industries is considerable.

This view explains our deliberate underweight. It also, however, illuminates an opportunity. We believe the next stage of AI-driven value creation will occur at the application layer – in the businesses that deploy AI to improve their products, lower costs, and compound their competitive advantages. Yet these companies have received virtually no credit from the market for doing so. In an environment where the ‘AI winners’ category is defined almost exclusively by semiconductor supply chain exposure, companies applying AI to enhance their businesses are being dismissed or ignored. We believe this disconnect is material and will eventually correct.