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Paulina McPadden, investment manager at Baillie Gifford, laid out a blunt assessment of the global semiconductor landscape in a Bloomberg interview: TSMC and SK Hynix hold near-monopoly positions in advanced chip manufacturing, and China isn’t catching up anytime soon.
The comments from one of the world’s most prominent growth-focused investment firms carry weight. Baillie Gifford has held TSMC since 1999 and SK Hynix since 2000, making this less a hot take and more of a thesis the firm has been building for over two decades.
The moat that keeps getting wider
McPadden’s argument rests on a structural reality that’s hard to argue with. US export restrictions on extreme ultraviolet lithography technology have effectively locked Chinese manufacturers out of the most advanced chipmaking processes. Without EUV machines, primarily made by the Dutch company ASML, producing cutting-edge logic and memory chips at scale is somewhere between extremely difficult and impossible.
Chinese DRAM producer CXMT, the country’s most prominent domestic memory chipmaker, sits one to two generations behind Samsung and SK Hynix as of Q1 2026. In semiconductors, where each generation leap represents billions in R&D and years of process refinement, that gap is more canyon than speed bump.
TSMC, for its part, is backing up the dominance thesis with hard numbers. The company raised its full-year 2026 revenue guidance by over 40% following strong Q2 results. It also bumped its capital expenditure forecast to between $60B and $64B. Then there’s the additional $100B investment TSMC announced for US-based facilities aimed at enhancing AI-related manufacturing capacity.
Two trillion-dollar milestones
Both TSMC and SK Hynix reached $1 trillion in market capitalization as of May 2026, joining the rarified club that includes Nvidia.
SK Hynix’s rise has been particularly striking. The company dominates the high-bandwidth memory (HBM) market, which has become the critical bottleneck for AI training infrastructure. Every major AI chip, from Nvidia’s latest to custom silicon from hyperscalers, needs HBM stacked alongside it.
Baillie Gifford has expressed interest in SK Hynix’s upcoming large US share offering, planned for July 2026. For a firm that prides itself on patient, long-duration investing, adding to a position it’s held for 26 years during a moment of peak AI demand is a confident signal about where they see the trajectory heading.
What this means for the AI investment landscape
The capital expenditure numbers alone tell a story about barriers to entry. TSMC spending $60B to $64B in a single year on capex, plus committing an additional $100B to US facilities, represents the kind of sustained investment that no new entrant can realistically replicate.
The risk side of this equation isn’t negligible. Concentration of critical manufacturing in a small number of companies, particularly with TSMC’s operations centered in Taiwan, introduces geopolitical fragility. The US facility investments partially address this, but building out meaningful geographic diversification in advanced fabs takes years.
Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.
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