Chip stocks were mixed after Taiwan Semiconductor Manufacturing (NYSE:TSM) raised its outlook and highlighted “conviction in the AI megatrend.”
The results and outlook also saw positive reactions from Wall Street analysts.
BofA raised the price target on TSM’s stock to NT$1,800 ($360 for ADR) from NT$1,600 ($330 for ADR) and reiterated its Buy rating on the shares.
“Real demand from AI was one of the focal points during the earnings call, and we sense that the company is turning a bit more positive on the L-T growth trajectory (though keeping the mid-40s % CAGR). In our view, TSMC’s position in such an area remains solid by ensuring system-level performance via front/back-end manufacturing, while it begins to evaluate with “customers’ customers” to better fulfill demand for advanced technology. Eyeing on an unrivalled position amid the megatrend of AI growth, we re-it. Buy,” said analysts led by Mike Yang.
Wells Fargo said TSM results and comments highlighted strengthening AI demand.
The analysts noted that TSM did not provide any specific update on its thoughts on graphics processing unit, or GPU, sales into China; only noting that it is confident in AI demand continuing to grow at a 40%+ compound annual growth rate, or CAGR, percentage over the next few years.
“We continue to consider TSMC’s High Performance Computing, or HPC/AI comments to be viewed as positive for Nvidia (NVDA), Advanced Micro Devices (AMD), Broadcom (AVGO), and Marvell Technology (MRVL),” said analysts led by Aaron Rakers. “TSMC did not provide any quantified update on its CoWoS [Chip-on-Wafer-on-Substrate] capacity expansion plans – only noting that it is working “very hard to narrow the gap.”
Earlier today, the global foundry reported third quarter results which beat analysts estimates. The company also raised its revenue growth forecast for the full year to the mid-30% range, compared to growth forecast of about 30% provided during the second quarter results.
However, Chairman & CEO C.C. Wei warned about uncertainties and risk from the potential impact of tariff policies on the company’s earnings call on Thursday.
“While we have not observed any change in our customers’ behavior so far, we understand there are uncertainties and risk from the potential impact of tariff policies, especially in consumer-related and price-sensitive end market segment,” said Wei. “As such, we will remain mindful of the potential impact and be prudent in our business planning going into 2026 by continuing to invest for the future megatrend.”
Wei noted that companies such as TSM are using AI internally to drive greater productivity and efficiency. He noted that enterprise AI is another source of demand, and added that the company continues to see the rising emergence of sovereign AI.
“We are also happy to see continued strong outlook from our customers. In addition, we directly received very strong signals from our customers’ customers, requesting the capacity to support their business. Thus, our conviction in the AI megatrend is strengthening and we believe the demand for semiconductor will continue to be very fundamental,” said Wei.
Shares of TSM were largely flat but in the green. Intel (INTC), Marvell Technology (MRVL) and Analog Devices (ADI) rose about 1% each, while GlobalFoundries (GFS), Texas Instruments (TXN), and Lattice Semiconductor (LSCC) were largely flat but in the green.
AI chipmakers, Nvidia (NVDA) and Advanced Micro Devices (AMD) rose nearly 1%. Broadcom (AVGO) jumped about 2%, while Qualcomm (QCOM) was largely flat but in the green.
Shares of chip equipment makers: ASML (ASML) rose about 2% and Applied Materials (AMAT) climbed nearly 1%. Lam Research (LRCX) fell around -1%, while KLA (KLAC) was flat but in the red.