Several chipmaker stocks rebounded Thursday amid optimism about AI demand at Taiwan Semiconductor Manufacturing Company (TSM) dazzling results in the third quarter.
AI chip maker Nvidia (NVDA) rose as much as 3%, at one point hitting an all-time intraday high as investors reacted to TSMC’s positive sentiment towards artificial intelligence. Nvidia’s rival, Advanced Micro Devices (AMD) climbed 1.3% before paring gains. Semiconductor company Broadcom (AVGO) ends the day up 2.7%. Chipmaker Qualcomm (QCOM) rose as much as 1.7%, although the stock later reversed direction. US-listed TSMC shares jumped 9.8%, pushing the company’s market capitalization past the $1 trillion mark.
After underperforming the broader market earlier this week, PHLX Semiconductor (^SOX) The index gained nearly 1% on Thursday, while the S&P 500 (^GSPC) closed apartment.
TSMC makes artificial intelligence chips designed by Nvidia and its rival Advanced Micro Devices, and these chips are used in data centers to power AI software such as ChatGPT and other popular robots. TSMC on Thursday reported third-quarter profits 54% higher than last year and raised its full-year sales outlook. The increase in forecasts is largely driven by “extremely robust AI-related demand,” Wei said. The chipmaker expects AI revenue to more than triple in 2024.
TSMC is one of three AI chip-capable companies that have played a crucial role in the massive wave of AI innovation that followed the launch of OpenAI’s ChatGPT in 2022. The company Taiwanese dominates its rival Samsung (005930.KS) and Intel (INTC) in the AI semiconductor market. Besides Nvidia and AMD, TSMC’s main customers include Apple (AAPL), Qualcomm and Broadcom.
TSMC’s sunny third-quarter earnings report and executive comments on artificial intelligence are welcome signs for anxious investors worried about the future of the AI space. Wall Street analysts have raised concerns in recent months about the lack of near-term ROI for big tech companies spending massive sums on AI infrastructure. The worry is that tech companies could cut spending on AI hardware, causing shares of companies like Nvidia and its supplier TSMC to fall.
Those fears were on display earlier this week, when the woes of an AI equipment company caused a rout in global chip stocks. Dutch tech giant ASML (ASME.DE) indicated this week in releasing its third-quarter results that sales of its machines – which are used by TSMC to make Nvidia’s main AI chips – would slow. However ASML’s results were driven by geopolitical concerns and other factors unrelated to the AI chip market.easily frightened investors sold shares of NvidiaAMD and AVGO, stocks suffering sharp declines.
TSMC’s results on Thursday helped these AI chip stocks partially recover from those losses.
The AI chip market is expected to grow 99% in 2024 and 74% next year, according to consultancy International Business Strategies, which tracks industry data. At the same time, the overall semiconductor market is expected to grow 18% this year and 12% in 2025. IBS data shows that the AI chip market – also known as the chip market accelerators – will outpace the sector as a whole until 2030.
Wall Street analysts reiterated their buy ratings on TSM on Thursday.
“(We) recommend TSMC stock as a base stock for investors looking to invest in semiconductors, which we view as the foundation of the expanding digital economy,” Needham analyst Charles Shi wrote in a note to investors.
Laura Bratton is a reporter for Yahoo Finance. Follow her on X @LauraBratton5.
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