Taiwan Semi Brings the Goods, Supporting These Five Holdings
AI, data center, smartphone and AI PC chip demand foster consensus-topping guidance.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
Better-than-expected quarter results and guidance from Taiwan Semiconductor TSM early on Thursday morning helped lift equities in pre-market trading, as did continued consensus-topping big bank earnings from Morgan Stanley MS and Bank of America BAC.
However, we’ve seen that pre-market move get dialed back following reports of renewed questions over a potential Israel-Hamas ceasefire. We’re also reading that the upcoming Trump White House is crafting sanctions to facilitate a Russia-Ukraine settlement and Canada is preparing tariffs on $105 billion of U.S. products should Trump opt to slap tariffs on Canadian goods.
As you can imagine, those geopolitical developments are casting some renewed uncertainty in the markets, despite the favorable earnings reports out on Thursday morning and the slightly weaker-than-expected December Retail Sales report.
Taiwan Semiconductor’s Result and Outlook
TSM reported December quarter revenue that rose 37% year over year (14.4% quarter over quarter) to $26.88 billion, which isn’t much of a surprise, given the monthly revenue reports the company furnishes. In its presentation materials for the quarter, we find its end market breakdown and that is far more interesting, given implications for our shares of Apple AAPL, Qualcomm QCOM, Universal Display OLED, Nvidia NVDA and Marvell MRVL.
Analyzing that segment breakdown, we find TSM’s High Performance Computing segment, which houses its AI and data center business, rose just shy of 69% year over year (18.9% sequentially) in the December quarter. TSM’s smartphone segment, up almost 18% quarter over quarter, backs recent figures from IDC and others that found double-digit shipment growth.
Looking ahead, TSM guided current quarter revenue to $25.0 billion to $25.8 billion, ahead of the $24.92 billion consensus. Leading that outlook, TSM sees demand for AI chips remaining robust while other markets, including new smartphone chips, AI PCs and WiFi 7 drive higher demand year over year. These findings certainly boost our comfort level with AAPL, QCOM, OLED, NVDA and MRVL shares, and they also support the prospects for solid earnings reports in the coming weeks.
Turning to TSM’s capital spending outlook, it delivered a far bigger figure than Wall Street was looking for and that is lifting our shares of Applied Materials AMAT. Our view has been robust demand for AI and data center chips, the expected rebound in smartphone and PC markets, and IoT growth would lead to tighter capacity and foster incremental semi-cap equipment spending.
Well, TSM is lifting its 2025 capital spending forecast to $38 billion to $42 billion, up as much as 41% compared to 2024 and about 19% higher than Wall Street expectations.
Coming Up
We’ll dig deeper into quarterly earnings from Morgan Stanley and Bank of America, and we’ll also share our take on the December Retail Sales report.
We’ll also touch on a digital advertising data acquisition by Trade Desk TTD that should bolster its advertising offerings, especially in the growing connected TV market.
More Pro Portfolio
- Pushed-Out Rate-Cut Expectations Prompt Our Exit From This Holding
- Weekly Roundup: Rate-Cut Recalibration Rocks the Market
- AI Takes the Wheel, Travelers Continue to Spend and the Navy’s Big Plans
At the time of publication, TheStreet Pro Portfolio was long BAC, MS, AAPL, QCOM, OLED, NVDA, MRVL, AMAT and TTD.
