A robust growth forecast from key chipmaker Taiwan Semiconductor (NYSE:TSM) has led to a surge in interest in chip stocks today.
Shares of Nvidia (NASDAQ:NVDA), Arm (NASDAQ:ARM), Advanced Micro Devices (NASDAQ:AMD) and Marvell (NASDAQ:MRVL) all surged higher in this morning’s session as investors priced in higher growth for the entire group.
Interestingly, Taiwan Semi’s results today did show a profit decline but still came in better than expected. Importantly, these results included expectations of 20% fourth-quarter revenue growth, driven by higher global demand for artificial intelligence (AI) chips.
Other chipmakers surged in today’s session, largely reflecting Taiwan Semi’s role as a key supplier to other U.S. semiconductor manufacturers. Let’s dive more into what was announced and why this sector is surging today.
Why Are Chip Stocks Up Today?
To a large degree, most top chip stocks have valuations many investors may consider at the higher end of what could otherwise be conceived as a normal range. Perhaps that’s putting it lightly, as valuation concerns indeed remain core to the bearish thesis around semiconductor manufacturers right now.
Accordingly, in order to justify these higher valuations, growth prospects need to come in better than expected. Thus, Taiwan Semi’s forward-looking Q4 revenue growth expectations have provided the shot in the arm investors have been looking for.
The broader rally we’re seeing materialize across this sector has led many names in the chip space to now trade at or near all-time highs. This is a sector that’s seen incredible momentum build last year as expectations of rate cuts continue to be priced into the bond market. Overall, these long-duration assets do look more attractive than they did at the end of 2022, and investors are certainly pricing in much more rosy growth expectations into these stocks’ valuations today.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
