Taiwan Semiconductor Manufacturing (NYSE: TSM) just reported earnings, showcasing that the AI build-out is alive and well. This makes several stocks attractive buys, including TSMC itself. I'm also bullish on Nvidia (NASDAQ: NVDA) and Broadcom (NASDAQ: AVGO), as increased semiconductor demand means that these two will sell more chips.
That's a bullish combination, and if you've missed out on the massive gain of these three over the past few years, now is the perfect time to buy, as they're each on sale.
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TSMC has had a rough few weeks and is down about 15% from its all-time high despite reporting incredible second quarter earnings. When a company reports strong earnings and gives a rosy outlook, yet the stock doesn't rally, that's my sign as an investor that the market isn't fully buying what TSMC is selling, which leaves a great investment opportunity for individual investors who can be contrarian.
During Q2, TSMC's revenue increased 36% year over year (in New Taiwan Dollars), and earnings per share skyrocketed 77%, showcasing improving operating leverage. TSMC has a grip on the chip industry, as it's the only one with enough capacity and advanced enough technology to support a major AI computing build-out, so as long as demand persists, TSMC will be a great investment.
Speaking of investments, TSMC is planning to invest another $100 billion in its Arizona fabrication facilities, highlighting growing demand for chips.
If the AI build-out were nearing completion, TSMC would be more cautious to invest this large sum in new production. However, CEO C.C. Wei stated that strong chip demand will persist through 2029 or 2030. This bodes well for TSMC's future and the other two. It's a great buy now and will remain a top stock pick in the AI-fueled market.
Nvidia's stock has rallied over the past few weeks, but it's still down more than 10% from its all-time high. With TSMC's strong future projections, it's clear that Nvidia will be in a great spot, and Wall Street analysts back this up.
For the remainder of the current fiscal year, Wall Street analysts estimate 82% revenue growth for Nvidia and 42% next year. That's strong growth for the world's largest company, yet none of that is priced into the stock.
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