AI Money: AI Surge Spurs Tech Giants’ Expansion, Fuels Investment Frenzy

The artificial intelligence boom is reshaping the tech landscape, with industry leaders like TSMC, Microsoft, and Anthropic racing to meet soaring demand and capitalize on new opportunities. As TSMC doubles down on chip production for AI, Microsoft courts private equity with AI tools, and Anthropic launches a $100 million fund for AI startups, the sector’s rapid growth shows no signs of slowing.

TSMC Sees Surging Demand, Plans Capacity Expansion

Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker, is racing to expand capacity as artificial intelligence fuels insatiable demand for its most advanced chips and packaging technologies.

In its Q2 earnings call, TSMC executives said AI-related demand is exceeding its ability to supply despite aggressive expansion plans. The company now expects 2024 revenue growth to slightly exceed its previous guidance of mid-20% growth in US dollar terms.

“The demand is so high. I had to work very hard to meet my customer’s demand,” said CEO C.C. Wei. “We continue to increase whatever, wherever, whatever I can.” He expects supply to remain “very tight all the way to probably and how we can be eased in 2026.”

TSMC plans to more than double capacity for its advanced chip packaging technology called CoWoS next year, after doubling it this year. CoWoS is crucial for connecting AI accelerator chips to high-bandwidth memory.

The company is also seeing strong demand for its leading-edge 3-nanometer and 5-nanometer chip manufacturing processes from AI customers. Wei noted, “We are not ruling out the possibility of further converting more N5 to N3 because we’re seeing very strong demand.”

TSMC raised its 2024 capital expenditure guidance to $30 billion to $32 billion, from $28 billion previously. CFO Wendell Huang said, “Between 70% and 80% of the capital budget will be allocated for advanced process technologies.”

The AI boom is improving TSMC’s profitability outlook. Q3 gross margin is expected to rise to 55.5% from 53.2% in Q2. Wei confirmed that advanced packaging profitability is “approaching corporate average.”

However, TSMC faces rising costs from expanding in higher-cost regions. Huang noted, “We expect that the overseas fabs will dilute our gross margins by between two to three percentage points next year and in the next several years.”

Anthropic and Menlo Ventures Launch $100 Million Fund for Startups

Artificial intelligence startup Anthropic, known for its AI chatbot Claude, has partnered with venture capital firm Menlo Ventures to establish a $100 million fund to support emerging AI companies.

On July 18, Anthropic announced the launch of the Anthology Fund, dedicated to fostering innovation in generative AI technology. The fund will focus on five key development areas: infrastructure, novel applications in industries like healthcare and education, consumer AI solutions, trust and safety tools, and AI apps that maximize societal benefits.

The Anthology Fund recipients will gain access to Anthropic’s products and research, $25,000 in credits for their AI models and additional support from Menlo Ventures.

Anthropic, founded in 2021 by former OpenAI members, has quickly made a name for itself. Its latest model, Claude 3, has been fully available to European users since May 14. Previously, Europeans faced restrictions that required VPN usage for access.

Menlo Ventures, which closed a $1.35 billion funding round in November 2023, has raised approximately $4 billion to support AI advancements. Notable investments in Anthropic include $4 billion from Amazon and $2 billion from Google.

Microsoft Pushes Tools to Transform Private Equity Firms

Microsoft is pitching for private equity firms to adopt its artificial intelligence tools, positioning generative AI as a transformative technology for the industry. The tech giant sees significant potential for AI to streamline operations and boost returns in private equity while acknowledging the sector’s cautious approach to new technologies.

According to Microsoft, generative AI can accelerate due diligence processes, improve deal sourcing efficiency, and optimize portfolio management for private equity firms. The company envisions AI assistants parsing financial statements, identifying investment risks and analyzing vast datasets to spot lucrative opportunities faster than human analysts.

“Generative AI can help accelerate the process of investing in assets by automating and improving various aspects of the investigation and evaluation process,” Microsoft stated in a recent blog post.

To ease adoption, Microsoft is promoting its Copilot for Microsoft 365 as an entry point for firms looking to leverage AI. The tool integrates with common office applications, offering immediate productivity gains without extensive customization.

Early adopters report promising results. Microsoft’s research indicates that 70% of Copilot users reported increased productivity, with 77% reluctant to give up the tool after becoming accustomed to it.

However, the company acknowledges that many users are still learning how to utilize AI assistants effectively. Microsoft emphasizes the importance of “prompt engineering” — crafting specific queries to unlock the full potential of generative AI tools.

As private equity firms navigate the AI landscape, Microsoft is positioning itself as a key partner, offering both off-the-shelf solutions like Copilot and custom AI development platforms for more advanced applications.

“Every AI journey is unique,” said Karen Del Vescovo, Microsoft’s Corporate Vice President for U.S. Financial Services. “The best way to start is to engage with Microsoft or a global partner to explore options and opportunities.”

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