TSMC Stock Plunge Over Nvidia Chip Delays Was Overdone, Strong Outlook Remains - Citi Analysts
In a recent note, Citi analysts reassured investors that the recent plunge in TSMC's stock price, fueled by reports of delays in Nvidia's advanced artificial intelligence chips, was an overreaction. Despite the setback, the chipmaker's outlook remains strong.
TSMC shares took a hit, dropping 15% over the past month, with steep losses on Monday following news of delays in Nvidia's Blackwell AI chips due to design flaws. This raised concerns about TSMC's earnings, as Nvidia is a major client for the company.
However, Citi emphasized that while there may be temporary technical issues with Nvidia's advanced chips, the overall demand for chips in the AI industry remains positive. The analysts pointed to strong order momentum from various sectors, including AI GPU/accelerator demand, CPUs, and smartphone SoCs based on advanced nodes.
Despite the recent stock price drop, TSMC reported stronger-than-expected earnings for the second quarter and provided a strong outlook for the year, driven by robust demand from the AI industry. The company's stock price was also affected by broader selling pressure in the technology sector.
While there were concerns about the impact of AI on earnings for companies like Microsoft, Alphabet, and Arm Holdings, Citi remained optimistic about Nvidia's outlook. The analysts highlighted Nvidia's position as a leader in advanced chip manufacturing and its strong demand in the market.
In conclusion, despite the temporary setback caused by Nvidia's chip delays, TSMC's solid earnings growth is expected to continue. The overall demand for chips in the AI industry remains positive, and TSMC's strong order momentum from various sectors bodes well for its future performance. Investors should focus on the long-term outlook for TSMC and the broader trends driving demand in the semiconductor industry.