Semiconductor manufacturing in Taiwan (NYSE:TSM)the world’s largest contract chipmaker, released its first quarter report on April 18. Its revenue rose 13% year-over-year to $18.9 billion and its profit rose 5% to $1.38 annually. American Certificate of Deposit (ADR). Both figures exceeded analysts’ expectations.
However, TSMC continued its earnings with a cautious outlook for the industry. It cut its full-year revenue forecast for the broader semiconductor market (excluding memory chips) from “more than 10%” growth to “around 10%.” ” and lowered its outlook for the foundry market from “around 20%” to “medium”. to adolescent growth.
These comments immediately sparked many semiconductor headlines, including Nvidia (NASDAQ:NVDA), Fall. But if we dig a little deeper, we’ll see that TSMC’s earnings report actually presents good news for Nvidia, so the AI chipmaker’s recent pullout could represent a great buying opportunity for patient investors .
Why is TSMC’s report a wake-up call for Nvidia’s future?
TSMC lowered its expectations for the semiconductor sector, but still reiterated its own revenue forecast of “low to mid 20%” growth for the full year, in line with forecasts analysts of a 21% increase. TSMC remains optimistic about its own prospects as it expects the expansion of artificial intelligence (AI) to offset continued weakness in the PC and smartphone markets. In other words, the growth of the AI market will continue to drive Nvidia, Advanced microsystems (NASDAQ:AMD)and other chipmakers to ramp up their production of high-end data center GPUs at TSMC.
During the first quarter conference call, CEO CC Wei said TSMC was still seeing an “increase in AI-related demand” and predicted its revenue from server AI processors would “more than double this year” and would represent a “low level of adolescence”. percentage of its annual turnover. Wei also predicted that the AI processor market would continue to grow at a compound annual growth rate (CAGR) of 50% over the next five years, accounting for more than a fifth of its revenue by 2028 and would become the “largest contributor” to its overall turnover. growth.
This all looks like bright green flags for TSMC’s main customer. Nvidia dominates the burgeoning market with its high-end data center GPUs for processing AI tasks. During Nvidia’s last conference call in February, CFO Colette Kress said demand for its latest data center GPUs was “far exceeding” available supply.
Why did Nvidia stock fall after TSMC report?
TSMC’s outlook is clearly bullish for Nvidia, but three factors appear to have caused Nvidia’s shares to fall. First, short-sighted investors were likely looking for reasons to take profits after Nvidia’s massive rally. Even after its recent decline, it remains up more than 170% over the past 12 months and nearly 400% over the past three years.
Second, many trading algorithms, ETFs and institutional investors buy and sell sectors in entire groups instead of focusing on…
