Taiwan Semi Delivers Favorable Multi-Year Outlook, Supporting These Holdings
As TSM reports encouraging results, UnitedHealth and D.R. Horton add to our earnings season unease.
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Equity futures are mixed Thursday morning with tech stock being lifted by the better-than-expected quarterly results and guidance from Taiwan Semiconductor TSM. That included a 73.5% year-over-year increase in the company’s High-Performance Computing segment, which houses its data center and AI chips.
TSM management reiterated expectations for revenue tied to AI accelerators to double this year, with overall revenue climbing near mid-20% for 2025. In a somewhat surprising move, TSM also issued longer-term guidance calling for its top line to grow at a mid-20% compound annual growth rate over the 2024-2029 period.
That lines up rather well with multi-year AI and data center forecasts and supports our positions in Nvidia NVDA and Marvell Technology MRVL.
On the smartphone front, TSM’s March-quarter revenue dipped 0.3% year over year, but, as we discussed, data from IDC showed the smartphone market rising 1.5% year over year, and Apple’s AAPL iPhone shipments up 10%. That share gain likely reflects the end-of-February launch of the company’s “low-end” iPhone 16e as well as the ongoing upgrade cycle as Apple Intelligence became more available across the globe. We recognize the June quarter tends to be seasonally weak for smartphone shipments, however, barring the impact of tariffs, those factors should help Apple once again outperform the overall smartphone industry.
To that end, and with continued demand for AI and data center chips, TSM guided its current quarter revenue to $28.4 billion-$29.2 billion, well above the $27.2 billion market consensus.
Earnings Season Shaping Up How We Expected
The TSM-related lift in AAPL and NVDA shares as well as their constituent percentages in the S&P 500 and Nasdaq Composite explain why those market measures are looking to open higher Thursday morning. However, that positive development is being offset by the sharp premarket drop in shares of UnitedHealth Group UNH, which missed March-quarter estimates, and updated its 2025 outlook well below market forecasts.
Shares of homebuilder D.R. Horton DHI are also falling in premarket trading as it also came up short for its March quarter and issued downside guidance for the balance of its fiscal year. We’ve had our concerns about the housing market, which led us to exit Builders FirstSource BLDR in early January at $140.25. With last night’s close, BLDR shares were trading near $113 and look to open even lower Thursday morning.
Those reports and others reaffirm our view the market will need to reset 2025 EPS expectations for the S&P 500. In turn, those EPS growth rate revisions are likely to spur renewed questions about proper P/E multiples for that market basket. For us, it’s simply another reason to keep our inverse ETF positions in play and carefully consider deploying the portfolio’s cash.
At the time of publication, TheStreet Pro Portfolio was long NVDA, MRVL and AAPL.
