Taiwan Semiconductor Manufacturing Co.: Leveraging Key Trends for Growth

Taiwan Semiconductor Manufacturing Co. (TSMC) stands at the crossroads of two influential trends that have the potential to drive its success in an otherwise lackluster consumer-electronics sector.

Although TSMC is anticipated to report a sales decline for its June quarter, market experts are eager to see the advantages derived from its association with tech giant Apple Inc. and its role as a supplier of silicon wafers for artificial intelligence (AI) applications.

According to Wedbush analyst Matt Bryson, TSMC’s close collaboration with Apple, particularly in the iPhone segment, which has proven to be resilient in the 2023 consumer market, along with its pivotal role in manufacturing a significant portion of AI products, positions the company favorably for future growth.

While second-quarter results are expected to surpass management’s quarterly guidance, it is important to consider the impact of currency fluctuations, particularly the appreciation of the US dollar against the Taiwanese dollar over the past year.

Notably, TSMC’s capital expenditure update in June exceeded expectations, providing much-needed relief to suppliers such as ASML Holding NV, KLA Corp., Applied Materials Inc., and Lam Research Corp.

The company’s stock performance has also been buoyed by the increasing demand for infrastructure supporting AI applications, with companies like Nvidia Corp. playing a crucial role in this ecosystem.

Although TSMC may not experience the same level of growth as Nvidia due to variances in AI requirements, the surge in wafer demand is likely to generate positive momentum for the company.

In conclusion, TSMC’s strategic ties with Apple and its significant involvement in the AI market position it uniquely for success amidst challenging market conditions.

Nvidia Stock Could Hit $625, According to Analysts

Analysts are comparing Nvidia to Apple and predicting that its stock could reach $625. Cowen & Co. analyst Krish Sankar is particularly interested in the company’s AI commentary. He believes the sustainability of data-center AI server build-outs, mobile supply chain inventories, automotive end market trends, and 7nm fab loadings will be key areas of focus during the call.

While Sankar maintains a market-perform rating, he does highlight the “key risks” of softness in the Android market and a possible slowdown in the automotive category.

On the other hand, Citi Research analyst Laura Chen has a buy rating on Nvidia shares. She expects a decline of 8% in TSMC’s sales in 2023 but anticipates a significant 29% growth in 2024 due to benefits from Apple and a stronger high-performance computing upside. Chen also mentions that despite low seasonality, semiconductor companies in Taiwan experienced a rally in share prices since the second quarter of 2023. However, she predicts that share prices may become volatile with near-term sales and earnings affected by prolonged inventory digestion and muted demand. Regardless, Chen believes that TSMC will continue to outperform its competitors in the foundry industry due to its leading position in advanced nodes and Apple’s new product ramp-up.

In terms of financial expectations, analysts surveyed by FactSet predict TSMC’s second-quarter earnings to be $1.07 per share with a revenue of $15.44 billion.

TSMC is scheduled to release its second-quarter results and hold a conference call on Thursday at 2 a.m. Eastern time.

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