Taiwan chipmakers to see positive momentum from AI demand, Citi says

Taiwanese chipmaking stocks clocked strong revenues in the fourth quarter, with Citi analysts projecting continued sales growth as the sector benefited from rapidly increasing artificial intelligence development. 

Chipmaking majors such as TSMC (TW:2330 ), MediaTek Inc (TW:2454 ), ASE Industrial Holding Co Ltd (TW:3711 ) and KYE Systems Corp (TW:2365 ) logged strong sales in December, which also pointed to robust revenues for the December quarter. 

Citi noted that while depreciation in the Taiwan dollar had also boosted revenues, they expected “positive momentum to continue in the AI supply chain,” and also expected product upgrades in edge AI to support Taiwan’s chip industry. 

Citi said among semiconductor stocks, TSMC, Mediatek , ASEH and KYEC were its more preferred picks, while among downstream chip firms, it preferred Quanta Computer Inc (TW:2382 ), Wiwynn Corp (TW:6669 ), Hon Hai Precision Industry Co Ltd (TW:2317 ), Delta Electronics Inc (TW:2308 ), Lotes Co Ltd (TW:3533 ), Accton Technology Corp (TW:2345 ), Asustek Computer Inc (TW:2357 ), and Aspeed Technology (TWO:5274 ). 

TSMC- the biggest Taiwanese company by market capitalization, will report its December quarter earnings on January 16. Reuters said analysts consensus was for a 58% leap in profit, after its revenue for the quarter surged nearly 28%. 

The company, which is the world’s biggest chipmaker by production capacity, has benefited greatly from a spike in AI-fueled demand over the past two years.

“We also expect TSMC to offer a positive outlook, i.e. 10-15% YoY growth for overall non-memory semiconductor industry thanks to normalized inventory level and specs upgrade for edge AI devices,” Citi analysts said. 

But outside AI, the outlook for chips used in computers and personal devices is less upbeat, as consumer electronics demand weakened over the past two years. But Citi also sees improving demand in the coming year, especially on the back of consumer demand for AI applications. 

Source: Investing.com