Nvidia results reinforce positive outlook on TSMC, BofA says

Investing.com -- Nvidia’s solid third-quarter results and guidance reinforce the positive outlook for Taiwan Semiconductor Manufacturing (NYSE:TSM ), Bank of America analysts said Thursday.

“The results underscore robust structural Al demand, with limited digestion periods as adoption accelerates,” analysts led by Brad Lin noted.

They point out that Nvidia (NASDAQ:NVDA )'s consistent one-year cadence for data center GPU development was particularly beneficial for TSMC, as it supports average selling price (ASP) content growth.

“The continuous scaling of Al models strengthens TSMC's leading-edge node demand and industry leadership. Additionally, we are pleased to learn NVIDIA’s robust GPM outlook into CY2025, which reflects the stronger value TSMC offers to clients, vs ASP hikes,” analysts continued.

AI demand remains above supply, with supply constraints continuing for Nvidia’s Hopper and Blackwell GPUs.

The demand for Blackwell is also expected to exceed supply into fiscal 2026, BofA notes, driven by significant investments in AI, a positive indicator for TSMC's business.

The Taiwanese manufacturing giant is actively addressing Chip-on-Wafer-on-Substrate (CoWoS) constraints by expanding its monthly CoWoS capacity, planning to increase from 35-40K units in the fourth quarter of 2024 to over 80K by the same period in 2025.

“As AI models grow in complexity and require greater computing power, we believe TSMC is well-positioned to meet these demands,” Lin and his team said.

Despite transitions in product offerings, Nvidia reported that demand remains resilient with no meaningful pauses. The demand for Hopper GPU is robust and extends into the next year, potentially outperforming previous investor concerns.

Moreover, the broader AI demand environment continues to show no signs of slowing down, supported by ongoing migration and adoption. Also, the upcoming shipments of GeForce RTX in the fourth quarter are expected to have healthy channel inventory levels, which could benefit suppliers like King Yuan Electronics.

Source: Investing.com