Taiwan Semi’s bullish earnings revives optimism

CNBC’s Jim Cramer on Tuesday reviewed the market response to Taiwan Semiconductor Manufacturing Firm’s earnings report final week, saying the sector — particularly capital tools firms — bought a lift from chip maker’s excessive figures and powerful outlook.

“With its bullish report final Thursday, Taiwan Semi was capable of remind traders how highly effective this theme is,” he stated. “Basically resetting your entire narrative for everybody working within the high-end semiconductor world, together with the semiconductor capital tools firms that stood out as a few of the greatest beneficiaries.”

TSMC is the world’s largest contracted chip producer, producing superior processors for high-profile firms with deep pockets, like Nvidia and Apple. The quarter beat expectations, with its revenue rising 57% from a yr earlier to a file excessive, CNBC reported. TSMC stated its high-performance computing division, which incorporates artificial intelligence, accounted for a lot of its gross sales. The corporate additionally indicated it will increase manufacturing capabilities and elevated its capital expenditures funds over the following yr, vowing to spend a lot of it on “superior course of applied sciences.”

Cramer defined that “superior course of applied sciences” means tools used for GPUs and different accelerators, or merchandise made by Nvidia and opponents. To Cramer, TSMC’s intention to extend spending on tools lifted shares of its suppliers, together with Applied Materials, Lam Research and KLA.

However he stated this rally is because of extra than simply TSMC’s numbers. As a substitute, the breakout within the group displays traders’ renewed religion within the alternative that lies forward for these firms, he instructed. Some on Wall Street, he continued, now really feel that the tip of former President Joe Biden‘s time period means restrictions on some superior semiconductor applied sciences could also be coming to an finish.

“Frankly, I do not assume the chance for these semiconductor capital tools firms was ever actually that diminished, even when their shares had been getting clobbered final yr,” Cramer stated. “There was only a notion drawback, and it is at all times laborious to maneuver the group when a bunch’s out favor.”

TSMC didn’t instantly reply to request for remark.

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Disclaimer The CNBC Investing Membership Charitable Belief holds shares of Apple and Nvidia.