Arm (NASDAQ:ARM) stock is trending today after chipmaker Taiwan Semiconductor (NYSE:TSM) reported better-than-expected first-quarter results. A price target increase from TD Cowen and a bullish initiation of ARM stock by Evercore ISI are also boosting shares of the chip designer today.
Here’s what investors should know.
Taiwan Semiconductor’s Q1 Results Came in Ahead of Estimates
For Q1, Taiwan Semiconductor’s bottom line came in at 225.49 billion New Taiwan dollars (TWD), or $6.97 billion, versus analysts’ average estimate of 215.4 billion TWD. The semiconductor firm’s net profits rose about 9% compared to Q1 2023. Importantly, Taiwan Semiconductor also generated sales of 592.64 billion TWD ($18.87 billion), slightly above analysts’ average estimate of 582.94 billion TWD. Revenue advanced 16.5% year-over-year (YOY).
Nvidia (NASDAQ:NVDA) and Apple (NASDAQ:AAPL) are major customers of both Taiwan Semiconductor and Arm. Arm designs chips for use in smartphones. It also provides blueprints for processors that are used in tandem with artificial intelligence (AI) chips.
Analyst estimate beats aside, Taiwan Semiconductor did note that Q1 revenue generated by its smartphone chips fell 16% sequentially. Meanwhile, sales of its “high-performance computing segment, which includes AI chips” advanced roughly 3% compared with the previous quarter.
“Our business in the first quarter was impacted by smartphone seasonality, partially offset by continued HPC [high-performance computing]-related demand,” said Taiwan Semiconductor Chief Financial Officer Wendell Huang.
Two Bullish Analyst Notes on ARM Stock
Evercore ISI started coverage of ARM stock this week with a $156 price target and an “outperform” rating. The firm expects Arm to benefit from increased use of AI by smartphones, along with increased use of its chips by data centers.
Evercore also believes Arm will benefit from higher internet of things (IoT) utilization. Arm has gained from the proliferation of its chips in the servers used by the largest cloud infrastructure players, including Microsoft (NASDAQ:MSFT), Evercore noted.
Separately, TD Cowen recently increased its price target on ARM stock to $125 from $95 per share.
On the date of publication, Larry Ramer did not hold (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.
