New Trade for November 8th, 2023

With a remarkable surge in its stock price, Nvidia has been the talk of Wall Street. Its shares have soared by over 189% since the beginning of the year, capturing the attention of both seasoned investors and newcomers alike.

But as we’re witnessing Nvidia’s remarkable journey, we’re also being introduced to a new batch of emerging stars in the semiconductor sector. 

 In today’s trade alert, we’ll hone in on one specific name as we delve into why Nvidia’s stellar performance sets the stage for a promising outlook for the chip industry as a whole and why this new contender is rapidly gaining favor among analysts and investors.

Taiwan Semiconductor Manufacturing Company (TSMC)

Why TSMC is Catching Our Attention:

TSMC plays a crucial role in the AI chipmaking industry, supplying products to tech giants like Apple, Nvidia, and Advanced Micro Devices. Despite recent restrictions on AI chip sales to China, industry experts view AI as a pivotal growth opportunity for the company. Analysts predict capacity to double by the end of 2024, with an additional 50% growth in 2025 to meet surging demand.

TSMC reported Q3 results last week that surpassed analysts’ expectations. While the company faced its most significant profit decline since 2019, it signaled the conclusion of a challenging inventory correction phase.

Wall Street’s Bullish Stance:

Goldman Sachs analyst Bruce Lu has added TSMC to the firm’s conviction list, citing signs of demand stabilization and the dawn of a “new growth chapter.” Lu forecasts a broad-based recovery in TSMC’s utilization rate in 2024, driven by restocking demand and the resurgence of PC/server demand.

Bank of America’s Brad Lin has raised the 2023 earnings estimate by 2%, and JPMorgan’s Gokul Hariharan has increased the 2024 and 2025 estimates by 5% and 1%, respectively.

Our Takeaway:

While investors may need to navigate some seasonality in early 2024, this presents an opportune time for long-term investors to consider TSMC, a company poised for mid- to high-teens growth in 2024.

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