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TSMC outlook drives US$165 billion chip rally in 2024 rebound bet

Bloomberg • 3 min read
TSMC outlook drives US$165 billion chip rally in 2024 rebound bet
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Semiconductor stocks from Tokyo Electron to Nvidia Corp gained more than US$160 billion of market value after Taiwan Semiconductor Manufacturing Co’s outlook for capital spending and revenue lifted hopes of a broad tech recovery in 2024.

TSMC’s better-than-projected numbers underscored expectations for a bounce-back in smartphone, chip and computing demand, following more than a year of post-Covid malaise. On Friday, the world’s most valuable chipmaker gained more than 6% in Taipei — its biggest gain in almost a year — after a near-10% climb in the US. Key suppliers Tokyo Electron and Advantest Corp gained more than 5% in Tokyo. Together, they fueled a gain in semiconductor stocks from the US to Asia of roughly US$165 billion, based on Bloomberg’s calculations.

TSMC’s outlook offered much-needed reassurance to investors accustomed to a depressed market. The main chipmaker to Apple Inc and Nvidia is budgeting capital expenditure of US$28 billion to US$32 billion and expecting revenue growth to return to at least 20% for the year. Executives also spent a lot of time talking about how the advent of AI should turbocharge the industry because of its immense computing needs.

In Europe, chip gear linchpin ASML Holding gained 4%, leading a broad regional rally that spilled over into US stocks including Nvidia and Intel Corp, driving the biggest gain in the Philadelphia Semiconductor Index since Dec 11.

“TSMC’s confidence around near-term fundamentals appears to have improved significantly over the past 4 to 5 months,”  Wedbush analysts wrote. “We see this more bullish outlook as predicated upon some combination of optimism around a growing contribution from AI, better expectations for traditional end market trends in 2024.”

See also: SK Hynix plans US$15 billion chip expansion to meet AI demand

Recovery Sprouting | World chip sales return to growth in sign of demand coming back

Signs of a recovery for the chipmaking sector have emerged in recent weeks. The Semiconductor Industry Association estimated chip sales increased in November after more than a year of declines. TSMC is projecting revenue growth of at least 8% to US$18 billion to US$18.8 billion in the March quarter, versus expectations for around US$18.2 billion. 

It’s now moving ahead with plans for chipmaking plants in Japan, Arizona and Germany — the first of which will begin mass production at the end of 2024 in a big boost to TSMC’s global footprint.

See also: TSMC delivers better-than-expected outlook as AI fuels demand

Chipmaker TSMC Expects Growth to Bounce Back in 2024  | Executives project a reversal of 2023's decline as AI drives tech demand

Uncertainty persists. This month, fellow chipmaker Samsung Electronics Co posted its sixth successive quarter of declining operating profit, as it weathered the impact of muted consumer demand in its own smartphone and memory businesses. 

Questions also overshadow China, the world’s largest computing, smartphone, internet and chip market. 

Apple — long one of TSMC’s most important customers — faced headwinds with its latest iPhone generation. Several analysts downgraded Apple on expectations of soft demand, and Jefferies has said the iPhone sales slump in China is likely to deepen. The US company has also been hit by a widening ban on foreign-device use among Chinese agencies and state-owned companies.

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