What chipmaking giant TSMC's earnings mean for 5 of our stocks, including Apple and Nvidia

Published Fri, Jan 19 20246:00 AM EST

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

The latest financial results and commentary from the world's biggest third-party chipmaker gave a big boost Thursday to Apple and semiconductor stocks, including artificial intelligence leader Nvidia . Taiwan Semiconductor Manufacturing Company , whose customers include the likes of Apple, Nvidia and fellow Club stock Broadcom , said its fourth-quarter revenue from smartphone chips grew a better-than-expected 27% on a quarterly basis. AAPL 1Y mountain Apple 1 year That's a favorable development for the iPhone maker amid questions about demand for the latest model. While still using Qualcomm 's modems, Apple designs its own processors for smartphones and personal computers. TSMC then manufactures them for Apple . Shares of Apple rose more than 3% on Thursday, though Bank of America upgrading the stock to buy, from a hold-equivalent rating, also factored into the gains. Apple's stock had gotten off to a tough start in 2024, amid a series of analyst downgrades . The stock was still down 2% for 2024 as of Thursday's close, following its 48% surge last year. TSMC said it expects companywide 2024 revenue to grow in the low-to-mid 20% range, ahead of the 20% growth rate expected by Wall Street analysts. TSMC's segment that includes AI-focused processors will have the highest growth rate in 2024, management said — an encouraging sign for Club name Nvidia, which dominates the market for chips used to train AI models like the one underpinning ChatGPT. "Let's not overthink it: Apple and Nvidia are the two that are most obvious" beneficiaries from TSMC's results, Jim Cramer said Thursday. After last year's triple, Nvidia shares started 2024 slow but have now gained more than 15% this month, including a nearly 2% gain on Thursday. NVDA 1Y mountain Nvidia 1 year TSMC also sees demand for AI chips increasing over the next couple years, predicting the products will represent a "high teens" percentage of its revenue in 2027, up from about 6% currently. Previously, TSMC had said AI chips were on track to become a "low teens" percentage of its revenue. In addition to Nvidia, TSMC's commentary on AI chips are positive for Club holding Broadcom, which helps develop AI processors for Google-parent Alphabet and has a networking business that stands to gain from the proliferation of AI workloads. Broadcom shares finished Thursday close to their mid-December all-time highs. AVGO 1Y mountain Broadcom 1 year It also is notable for Bullpen member and former Club stock Advanced Micro Devices , which is making its first meaningful foray into the data-center AI chip market this year; TSMC makes AMD's chip, known as MI300X . Shares of AMD reached new all-time highs Thursday. TSMC's results and guidance Thursday offer so-called "read-throughs" on its customers, many of which are Club stocks such as Apple, Nvidia and Broadcom. TSMC is by far the world's largest advanced semiconductor foundry, meaning it produces chips on behalf of other companies that design them. TSMC's exposure to a wide range of end markets — which, in addition to AI and smartphones, includes automotive and other consumer electronics. It has turned the company into a bellwether for the entire semiconductor industry. In a note to clients Thursday, Goldman Sachs chip analysts said TSMC's bullishness on the AI market is "unsurprising," but still offers support for their optimism on Nvidia and AMD. KeyBanc Capital Markets analysts also said the results and commentary are positive for Broadcom. TSMC's results come as investors look for signs about the sustainability of the AI chip boom, which was sparked by the launch of viral ChatGPT in late 2022 . After demand far outstripped supply last year, there's general agreement on Wall Street that 2024 is set to be another strong year for AI chip sales, as additional manufacturing capacity comes online to improve the availability of Nvidia's processors and AMD's new offering arrives. But some on Wall Street are worried that orders for AI chips will begin to moderate in 2025, thrusting the market into a so-called digestion phase. All the attention paid to AI chips in 2023 may have obscured the fact that it was an overall tough year for the semiconductor market — evidenced by TSMC posting an 8.7% annual decline in revenue. Against that backdrop, TSMC confirming the industry is heading for a better 2024 could be viewed somewhat positively for a pair of non-Club tech holdings. LIN 1Y mountain Linde 1 year Industrial gas supplier Linde and specialty chemicals firm DuPont , both Club stocks, have exposure to the electronics industry. Linde has been roughly flat in 2024 and only about 4% off its all-time high reached in mid-December. DuPont has lost roughly 4.5% in 2024, but only needs to gain about 7% to reach its 52-week high set back in July. Electronics represented about 8% of Linde's sales in the three months ended Sept. 30. But that end market has been somewhat challenging for the company lately, posting three straight quarters of sequential sales declines. DD 1Y mountain DuPont 1 year Similarly, weakness in the semiconductor industry has weighed on DuPont's overall results in recent quarters. An expected return to growth for the chip market is part of our investment thesis in DuPont, which joined the portfolio in August . On DuPont's third-quarter earnings call, management said it experienced "nice growth with TSMC" as the foundry giant worked to expand production of the most advanced chips. DuPont has said its exposure to the chip market is skewed toward advanced chips. On Thursday, TSMC indicated it expects revenue from its most advanced manufacturing process on the market — known as 3-nanometer — to more than triple in 2024. Presumably, that's also good news for DuPont. To be sure, however, we trimmed our Dupont position on Jan. 8 , selling shares a few dollars higher from current levels, due to our concerns that weakness in China could cause DuPont to push out its recovery forecast again. (Jim Cramer's Charitable Trust is long AAPL, NVDA and AVGO. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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TSMC headquarters in Hsinchu, Taiwan. The semiconductor manufacturer's products lie at the heart of everything from automobiles to smartphones.

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