The shares of US chipmakers surged ahead of Thursday’s opening, due to a favorable sales forecast by Taiwan Semiconductor Manufacturing Co.
Investors are now more confident in this sector after the world’s biggest contract chipmaker increased its revenue expectations for 2018. It also highlighted how AI chips would contribute to a large portion of their revenue.
TSMC increases revenue forecast
TSMC is a major supplier of Nvidia, Apple and other companies. Its Q3 profit grew by 54%, exceeding expectations, as the demand for AI chips helped offset weakness in mobile.
Chip giant reports net profit of NT$325.3bn ($10.1bn) for September quarter, exceeding analyst’s average of NT$299.3bn.
Leading AI chip producer expects to generate a high-teens percentage of revenue in 2024 from AI processors.
Investors were reassured by this optimistic outlook, as semiconductor stock values have soared in the last two years – largely because of a boom in AI spending from Big Tech companies.
TSMC shares listed in the US rose 7% during premarket trading. If the gains continue, the market capitalization of the company will be close to $1 trillion.
Nvidia AMD and other benefit
Shares of major chipmakers rose following TSMC’s prediction.
Nvidia and AMD, both leaders in AI chip technologies, have both gained over 2%.
Broadcom, Qualcomm and Micron all increased their share between 1.5% to 3%.
Intel’s stock, which had been struggling to keep up with the competition, has also seen a rise.
Analysts believe that this transformation will take many years. The company is investing heavily to expand its capabilities in chip fabrication to be able to compete against TSMC for advanced contract manufacturing.
Respite after ASML’s forecast cut
TSMC’s forecasts provided a much-needed boost for the semiconductor industry, particularly after ASML, a leader in chipmaking technology, slashed their estimates, causing concern about sluggish-than-expected demand recovery of non-AI chips.
TSMC shares listed in the US have increased by over 80% so far this year. This is a significant improvement compared to many other major Asian tech companies.
Retail investors in the US are actively trading TSMC’s American Depositary Receipts (ADRs) as a reflection of investor confidence.
Robinhood platform’s early trading shows that TSMC ADRs are up 4.5%.
Nvidia has seen its value more than double as Wall Street favors semiconductor stocks for the growing AI and technology industries.
TSMC CEO: AI growth is real and not a bubble.
CC Wei sought to dispel the question of whether or not the AI boom is a bubble on a Thursday conference call.
Gokul Hariharan, an analyst at JPMorgan, asked him about the potential return of investment in generative AI.
Wei, according to FactSet, said:
Our customers, even those who build their own chips, are always on the phone with us. TSMC is the home of almost all AI innovators. We get probably the most comprehensive and in-depth look at this industry than anyone else. We have real-life experience, so what I’m saying is real. In our R&D, we have been using AI and machine-learning in the fab.
AI could boost productivity by 1 billion Taiwan dollars ($31million).
The post US Chip Stocks Rise as TSMC AI Forecast Boosts Investor Optimism may be updated as new developments unfold.
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