Shares of several semiconductor manufacturers rose on Thursday as Taiwan Semiconductor Manufacturing Co.’s (TSM) strong third-quarter results sparked optimism about AI demand.
AI chip maker Nvidia (NVDA) rose 3% to a new intraday high as investors reacted to TSMC’s positive outlook on artificial intelligence. Nvidia rival Advanced Micro Devices (AMD) rose 1.3% before paring. Semiconductor company Broadcom (AVGO) ended the day up 2.7%. Semiconductor maker Qualcomm (QCOM) rose as much as 1.7%, but the stock has since reversed course. U.S.-listed TSMC shares rose 9.8%, pushing the company’s market capitalization to more than $1 trillion.
After underperforming the broader market earlier this week, the PHLX Semiconductor (^SOX) index rose nearly 1% on Thursday, while the S&P 500 (^GSPC) closed flat.
TSMC makes artificial intelligence chips designed by Nvidia and its rival Advanced Micro Devices, which are used in data centers to power AI software such as ChatGPT and other popular bots. has been. TSMC on Thursday reported a 54% increase in third-quarter profit from a year earlier and raised its full-year sales outlook. Wei said the guidance increase was primarily driven by “very robust AI-related demand.” The chipmaker expects AI revenue to more than triple in 2024.
TSMC is one of three companies capable of manufacturing AI chips that will be critical to the wave of AI innovation following the launch of OpenAI’s ChatGPT in 2022. Taiwanese companies are overwhelming rivals Samsung (005930.KS) and Intel (INTC) in the AI field. semiconductor market. Besides Nvidia and AMD, TSMC’s major customers include Apple (AAPL), Qualcomm, and Broadcom.
TSMC’s upbeat third-quarter earnings report and executive commentary on artificial intelligence are welcome signs for anxious investors worried about the future of the AI space. Wall Street analysts have expressed concern in recent months that Big Tech companies spending billions on AI infrastructure are not seeing a short-term return on their investments. The worry is that tech companies could ease spending on AI hardware, causing stocks such as Nvidia and its supplier TSMC to fall.
Those concerns were on display earlier this week when AI equipment companies’ woes triggered a selloff in global semiconductor stocks. Dutch tech giant ASML (ASME.DE) signaled in its third-quarter earnings report this week that sales of its machinery, which TSMC uses to make Nvidia’s key AI chips, will slow. Although ASML’s performance was driven by geopolitical concerns and other factors unrelated to the AI chip market, frightened investors sold off shares of Nvidia, AMD, and AVGO, and the stock price plummeted.
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TSMC’s results on Thursday helped these AI chip stocks partially recover from their losses.
The AI chip market is expected to grow 99% in 2024 and another 74% next year, according to International Business Strategies, a consulting firm that tracks industry data. Meanwhile, the overall semiconductor market is expected to grow by 18% this year and 12% by 2025. According to IBS data, the AI chip market, also known as the accelerator chip market, will outperform the entire sector through 2030.
Wall Street analysts reiterated their “buy” ratings on TSM on Thursday.
“[We]recommend TSMC stock as a core holding for investors looking to invest in semiconductors,” Needham analyst Charles See said in a note to investors. We believe that this is the foundation of the future.”
Laura Bratton is a reporter for Yahoo Finance. X Follow her at @LauraBratton5.
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