Wedbush analysts have reiterated their outperform rating on Taiwan Semiconductor Manufacturing Company following the premier global microchip manufacturer’s latest earnings beat.
Wedbush analysts wrote: “While TSMC's quarter had some puts and takes, we are viewing results through a constructive lens, given the positive commentary from TSMC regarding its outlook for artificial intelligence."
Net profit for the world’s largest chip manufacturer came in at 225.49 billion New Taiwan dollars (US$7.2 billion), up 8.9% year on year thanks to higher demand for high-performance computing (HPC) chips used to power artificial intelligence.
HPC chips, which account for 46% of TSMC’s revenues, were up 22% year on year, “a high watermark since 2018 (when TSMC instituted its current revenue segmentation”, said Wedbush.
Automotive chip demand was the one black spot on the earnings, according to Wedbush, reflecting stalling electric vehicle demand.
“The AI narrative at this juncture in our view dwarfs other data points in light of its importance in driving technology and semiconductor stock valuations (including TSMC's).”
Wedbush lifted its stock rating from 850 New Taiwan dollars to 900 new Taiwan dollars (US$26.2 to US$27.7) per share.
The results also bode well for Nvidia Corporation: “TSMC's more optimistic commentary around AI demand as well as its commentary suggesting its ability to supply product is still trailing market demand are positive signs for Nvidia,” said Wedbush.