The Taiwan Semiconductor Manufacturing Company (TSMC) is expected to recover from its current slump in the second half of this year on the back of optimistic projections from chip design NVIDIA Corporation earlier this week. NVIDIA's earnings report for the first quarter of its fiscal year 2024 was one of the strongest in recent years as the firm thumped its chest and predicted an eye-popping trillion-dollar market opportunity resulting from projections of the shift in the data center industry to artificial intelligence platforms.
This forecast and the resulting valuation boom for NVIDIA has carried its way to TSMC, with Bank of America reiterating a Buy rating for the firm's shares earlier today and sticking to a price target with considerable upside.
TSMC Shares Expolode In Taiwan's Stock Market With Significant Buying From Foreign Investors
Bank of America shared its latest take on TSMC in a fresh analyst note in Taiwan, where it kept a NT$670 share price target for TSMC a Buy rating for the shares. TSMC's shares closed at NT$566 in the Taiwan stock market at the end of the latest trading day. The shares opened at a 52-week high of NT$568 - indicating the true extent of optimism around them following NVIDIA's blockbuster results earlier this week.
The key takeaway from the American chip giant's report, apart from a resurgence of growth in its former bread-and-butter gaming segment, was the revenue guidance NVIDIA shared for the current quarter. This estimate stood at a whopping $11 billion, significantly higher than Wall Street's roughly $7 billion estimates. At the same time, NVIDIA's inventory also dropped, leading to speculation that in case the firm was not playing it safe, considering the inventory glut that has plagued the semiconductor industry, it was likely to see stronger-than-expected demand as well.
This outlook from NVIDIA is also on Bank of America's mind. Its analyst note shares that the $11 billion figure from the chipmaker also stands to inject fresh life into TSMC's fortunes. The world's largest chipmaker has been unimmune to the downturn in the semiconductor market as purchasing powers sapped up in an inflationary environment and chip designers overestimated demand only to find that buyers were unwilling to spend that much on computing products.
The bank believes that NVIDIA represents roughly ten percent of TSMC's revenues and expects this proportion to grow in the future as the demand for artificial intelligence products increases. It adds that $11 billion in revenue during the second quarter allows TSMC to grow in the second half of this year.
NVIDIA's strong financials also led to strong interest from foreign investors in TSMC's shares. Data shows that 69,200 units or more than 110,000 shares were cumulatively bought. This interest surged after NVIDIA reported an inventory drop, leading to speculation that the firm would place more orders for TSMC's 5-nanometer and 7-nanometer semiconductor products.
As for the reasons behind the belief that TSMC's fortune will improve in the second half, even though NVIDIA's revenue is expected to grow before that, there is speculation that the Taiwanese fab is ramping up its semiconductor production in its Fab 15 and 14A. Additionally, its Fab 18B, responsible for manufacturing 3-nanometer, will grow its output by ten thousand wafers to to the addition of the N3E chip process.
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