Stock price of semiconductor giant Broadcom (NASDAQ:AVGO)Intel (NASDAQ:INTC)Taiwan Semiconductor Manufacturing (NYSE:TSM) All that came to light on Friday after Bank of America analyst Vivek Arya reportedly encouraged investors to invest in a “generational capital investment cycle in generative AI infrastructure.” rose.
Capex is an abbreviation for capital expenditure. Broadcom, TSMC, and Intel are considered part of the aforementioned “capital investment cycle” in that they produce the semiconductor chips that AI companies must purchase to make their artificial intelligence (AI) programs work. chip manufacturer. As of 1 p.m. ET, Broadcom stock was up 2.5%, Intel was up 3.5%, and Taiwan Semiconductor Manufacturing Co., also known as TSMC, was the best of the bunch, up 3.6%.
This is the overall picture behind today’s movements in semiconductor stocks in general. But why exactly are these three stocks moving? Well, in the case of Broadcom, the answer is obvious. Along with Nvidia, Arya named Broadcom as his top pick among AI stocks.
Meanwhile, Intel and TSMC have additional catalysts worth noting.
What’s good for Nvidia is considered good for TSMC, as it’s Nvidia’s go-to company for contract chip manufacturing. In addition, TSMC last night said its new advanced 4-nanometer chip manufacturing facility in Arizona is producing a “yield” of 4% more usable chips than a similar TSMC manufacturing facility in Taiwan. We got some particularly good news when Bloomberg reported. This fact should directly translate into higher revenue and improved profitability for TSMC, with a company spokesperson calling the numbers “very satisfactory with a very good yield.”
TSMC also promised to begin “mass production” at the plant in early 2025. This would allow the company to take advantage of these efficiency gains, potentially increasing TSMC’s chances of benefiting from U.S. government subsidies under the CHIP Act.
surely. What about Intel?
I wish I had better news on this front, but here’s the truth. Beyond the widespread enthusiasm for chip stocks generated by Arya’s encouragement, Intel stock appears to have benefited the most today from the latest information about plans to expand chip production in Ohio. Specifically, the company’s website states, “Intel will invest more than $28 billion to build two new state-of-the-art chip factories in Ohio to ramp up production to meet demand for advanced semiconductors. “This is a plan.”
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This sounds like good news. It looks like Intel is moving forward and looking to leverage Arya’s “generational capex cycle in generative AI infrastructure” in the same way as TSMC.
But here’s the problem. Intel actually announced a $28 billion investment in Licking County, Ohio in January 2022, but today’s update does not change that announcement in any way, nor does it indicate an acceleration of production or the size of the company’s investment. No. Rather, according to Intel’s own webpage, the company’s “latest update” on its Ohio plans consists of “photos and B-roll video of the ‘Ms. Armstrong’ crane added on October 25, 2024.” That’s what it means.
So basically, all Intel said today is that the same production plans that have been in place for nearly the past three years are still in place and unchanged. That doesn’t seem like a big reason why Intel’s stock price is rising today. Especially considering that Intel has less than $1 billion in annual revenue, is the least profitable of these three semiconductor companies, and is the only one burning cash ($12.6) in the last 12 months. billion dollars).
If I had the choice to invest in any of these three companies, I would put TSMC stock at the top of my list. TSMC stock has a P/E ratio of 27x, is cash-rich, and generates plenty of free cash flow. And Intel stock is below that. Bottom.
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Bank of America is an advertising partner of The Motley Fool’s Ascent. Rich Smith has no position in any stocks mentioned. The Motley Fool has positions in and recommends Bank of America, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and Intel and recommends the following options: November 2024 $24 short calls on Intel. The Motley Fool has a disclosure policy.
“Why Intel, Broadcom and Taiwan Semiconductor Stocks Soared Today” was originally published by The Motley Fool
