This AI stock is poised for impressive gains in 2024 and could soar after its upcoming quarterly report.
Artificial intelligence (AI) has played a central role in the rally in semiconductor stocks over the past few years, as evidenced by the PHLX Semiconductor Sector Index’s impressive 131% jump over this period. The good news is that as AI adoption moves from data centers to edge devices such as smartphones, personal computers (PCs), and automotive applications, the widespread adoption of this technology is set to drive stronger growth in this market. is.
For example, the market for chips used in smartphones is expected to jump from $104 billion in 2023 to $146 billion next year. Meanwhile, PC semiconductor spending could jump to $107 billion in 2025 from $89 billion last year, while semiconductor spending in the auto market is expected to jump from $79 billion last year to $104 billion next year. . Meanwhile, spending on semiconductors used in AI servers and data centers is expected to jump from $78 billion in 2023 to $136 billion next year.
For investors looking to take advantage of these fast-growing semiconductor end markets, which have grown significantly thanks to AI, Taiwan Semiconductor Manufacturing Co., Ltd. (TSM 2.71%)What is popularly known as TSMC seems like an ideal bet.
The foundry giant serves all the areas discussed, and the latest news from the company confirms the fact that AI is proving to be a solid growth driver for the company. Let’s see why.
TSMC is set to release yet another impressive quarterly report
TSMC has released its sales data for September, reporting an impressive increase in monthly revenue of 251.8 billion New Taiwan (NT) dollars, an increase of almost 40% year-on-year. Combining the monthly revenues of July, August, and September, TSMC’s third quarter revenues amounted to approximately NT$760 billion, an astonishing 39% increase year-on-year.
This figure exceeds analysts’ expectations for third-quarter sales of NT$748 billion. As a result, TSMC is likely to beat Wall Street’s expectations when it reports third-quarter results on October 17th. Analysts had expected the company’s earnings per share to be $1.80, up 40% year-over-year, but stronger-than-expected revenue growth could lead to higher earnings.
Another thing to note is that TSMC’s revenue in the first nine months of 2024 increased by 32% year over year. This means TSMC is on track for revenue growth that exceeds the 26% increase in revenue to $87.2 billion that analysts expect the company to achieve in 2024. More importantly, TSMC is expected to maintain healthy growth levels in the coming years.
TSM earnings forecast data for current year by YCharts
But don’t be surprised if TSMC’s revenue growth beats Wall Street’s expectations. That’s because the company is one of the most important busts in the large-scale AI space. It produces and manufactures chips for a variety of fabless chipmakers, including Nvidia, AMD, Qualcomm, Broadcom, and Marvell Technology.
Even better, chipmakers with their own manufacturing facilities, such as Intel, are also looking to leverage TSMC’s advanced chip manufacturing processes to produce more efficient and powerful chips. But TSMC’s AI opportunities don’t end there. The company also makes chips for Apple, and is well-positioned to take full advantage of the growth in AI smartphone sales.
Now, if we take a closer look at the customers being discussed, it will become clear that TSMC is one of the best ways to create an AI chip boom in various fields. For example, Nvidia, AMD, and Intel are looking to make the most of the opportunities available with AI accelerators. Nvidia is currently running away from this market, using TSMC’s process nodes to manufacture chips that deliver faster performance and lower power consumption than rivals.
The AI-enabled PC market includes Qualcomm, AMD, and Intel. Similarly, Qualcomm and Apple present a path for TSMC to explore the smartphone space. And finally, Marvell and Broadcom will allow TSMC to enter another fast-growing niche of AI semiconductors in the form of custom AI chips. Simply put, it doesn’t matter which of these companies will gain more market share and end up dominating their respective niches. TSMC is most likely the ultimate winner.
That’s why TSMC’s advanced packaging technology used to produce AI chips will be sold out until 2025, according to Morgan Stanley. As a result, the company is expanding its AI chip production capacity one year ahead of schedule. This should ideally allow TSMC to manufacture more chips, fulfill more orders, and realize significant revenue and revenue growth.
It’s easy to buy stocks before October 17th
The discussion made it clear that TSMC has great momentum heading into its third quarter earnings report scheduled for release on October 17th. The company beat consensus estimates and is likely to provide stronger-than-expected guidance for the fourth quarter as well. You can give stocks a good shot.
TSMC stock is up 77% this year already, and looks poised to end the year on a strong note. Considering this AI stock is trading at an attractive forward P/E of 22x despite its strong performance this year, it’s an easy buy right now considering it’s built for further upside. It seems so.
Harsh Chauhan has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom, Intel, and Marvell Technology and recommends the following options: November 2024 $24 short calls on Intel. The Motley Fool has a disclosure policy.
