Taiwan Semiconductor Manufacturing (TSM) is sparking a rally in chip stocks Thursday after the semiconductor manufacturer beat top- and bottom-line expectations for its fourth quarter and issued a strong outlook for its first-quarter results.
At last check, TSM shares were up nearly 5%, while fellow semiconductor stocks Lam Research (LRCX) and KLA Corp (KLAC) were roughly 7% higher.
In the quarter ending December 31, the Taiwan-based chip manufacturer, whose clients include Magnificent 7 stocks Nvidia (NVDA) and Apple (AAPL), said revenue increased 37% year over year to $26.9 billion. Its earnings per share (EPS) rose 55.6% from the year-ago period to $2.24.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"Our business in the fourth quarter was supported by strong demand for our industry-leading 3 nanometer and 5 nanometer technologies," said Taiwan Semiconductor Chief Financial Officer Wendell Huang in a statement.
Huang added that in the first quarter, "we expect our business to be impacted by smartphone seasonality, partially offset by continued growth in AI-related demand."
Is Taiwan Semiconductor stock a buy, sell or hold?
Taiwan Semiconductor has put in an impressive performance on the price charts over the past 12 months, up 114% on a total return basis (price change plus dividends) vs the S&P 500's 26% gain. And Wall Street thinks the tech stock has more room to run.
According to S&P Global Market Intelligence, the average analyst target price for TSM stock is $236.14, representing implied upside of nearly 9% to current levels. Additionally, the consensus recommendation is a Strong Buy.
Financial services firm Needham is one of those firms with a Buy rating on TSM stock and has a $225 price target.
"We expect Taiwan Semiconductor Manufacturing's foundry business to strengthen as we do not foresee a competitive challenge for the next several years," says Needham analyst Charles Shi. "As Moore's Law [an observation that suggests the number of transistors in an integrated circuit doubles every two years] slows, we expect TSMC will need to spend aggressively in research and development and invest in capacity."
The analyst adds that he expects Taiwan Semiconductor will need to expand its operations outside of Taiwan " as the world enters a new era of superpower competition."
Related content
-
Is Your Social Security Earnings Record Wrong? Here's How to Fix ItYour Social Security benefits are based on your Social Security earnings record. It's important to review your records to avoid having your benefits reduced.
-
Stock Market Today: Markets Discount Another U.S. DowngradeAfter Friday's closing bell, Moody's followed Standard & Poor's and Fitch and cut its rating on U.S. government debt.
-
Stock Market Today: Markets Discount Another U.S. Downgrade
After Friday's closing bell, Moody's followed Standard & Poor's and Fitch and cut its rating on U.S. government debt.
-
Donating Complex Assets Doesn't Have to Be ComplicatedIf you're looking to donate less-conventional assets but don't know where to start, this charity executive has answers, such as considering a donor-advised fund (DAF) for its tax benefits and ease of use.
-
What's Next for Stocks After a Chaotic SpringA chaotic tariff policy buffets investors looking for clarity on the economy and inflation.
-
Think a Repeal of the Estate Tax Wouldn't Affect You? WrongThe wording of any law that repeals or otherwise changes the federal estate tax could have an impact on all of us. Here's what you need to know, courtesy of an estate planning and tax attorney.
-
In Your 50s? We Need to Talk About Long-Term CareMany people don't like thinking about long-term care, but most people will need it. This financial professional recommends planning for these costs as early as possible to avoid stress later.
-
Where to Invest in an Uncertain MarketIn an uncertain market, you can still pocket juicy payouts ranging from 4% to 14%, depending on risk.
-
My First $1 Million: Events Industry CEO, 65, Northern New JerseyEver wonder how someone who's made a million dollars or more did it? Kiplinger's My First $1 Million series uncovers the answers.
-
Social Security Pop Quiz: Are You Among the 89% of Americans Who'd Fail?Shockingly few people have any clue what their Social Security benefits could be. This financial adviser notes it's essential to understand that info and when it might be best to access your benefits.
