TSMC stock jumps over 6% as Nvidia asks chipmaker to make memory chips

The AI boom is creating another opportunity for Taiwan Semiconductor Manufacturing Company (TSMC), and this time it is not just about making processors. The world's biggest contract chipmaker is reportedly exploring the production of advanced memory chips after a request from its biggest customer, Nvidia. The development could take TSMC into a business currently dominated by Samsung, SK Hynix and Micron. Investors seem excited about the possibility, with TSMC's US-listed shares jumping more than 6 per cent in early trading on Friday.According to a report by The Information, TSMC has started drawing up plans to manufacture a next-generation memory technology called 3D DRAM. Reuters reported that the company is reportedly considering building new factories or acquiring an existing semiconductor facility and converting it for memory production.Why Nvidia needs TSMC to make memory chipsTo understand why this matters, it helps to look at what is happening inside the AI industry. Companies are building increasingly powerful AI processors, but these chips need equally capable memory to store and retrieve data quickly. The rapid expansion of AI data centres has sent demand for memory soaring, leaving manufacturers struggling to keep up.This is particularly important for Nvidia, whose GPUs power many of the world's AI data centres. More memory supply could help address a growing bottleneck in the AI hardware supply chain. The proposed 3D DRAM technology is different from conventional DRAM. Instead of arranging memory cells in a horizontal layer, it stacks them vertically to increase capacity. It is also different from High Bandwidth Memory (HBM), the advanced memory used alongside AI processors. TSMC already works with SK Hynix on HBM4 development, but manufacturing 3D DRAM would be a much bigger step into the memory business itself.TSMC could take on Samsung, SK Hynix and MicronThe reported move would put TSMC in competition with three established memory makers: Samsung Electronics, SK Hynix and Micron. All three are also exploring next-generation memory technologies. Interestingly, TSMC is not entirely new to this business. The company manufactured standard memory chips from the 1990s until the late 2000s, but later focused on its contract chipmaking business.However, this expansion is far from confirmed. TSMC told The Information that its focus remains on its core foundry business, while no production timeline has been disclosed. Moving from plans to large-scale manufacturing could take years.There is also a business risk. Memory is a cyclical market, and today's shortage could eventually turn into oversupply once new factories start producing chips. For now, Nvidia's reported request has opened an interesting possibility, but TSMC still has a long way to go before it becomes another major memory chipmaker.- Ends