Andy was a featured panelist discussing semiconductor earnings on The Watch List with Nicole Petallides.
Is this a cyclical turn or a bear market head fake? There are many moving parts in the semiconductor sector.
We saw chip shortages and supply chain issues over the past 2 years. In turn, semiconductor companies spent a lot of money to ramp up production. Capital spending across the industry rose by 34% in 2021.
Because demand can change much more quickly than the two or more years needed to build a chip factory, history has taught us that booms often end in busts.
While stock prices have moved strongly to the upside recently, the fundamentals remain challenging. Intel, AMD, Nvidia, Qualcomm, and Micron are among those that have announced layoffs or hiring freezes. Intel just announced widespread pay cuts following its weak 4Q earnings result.
The $280 billion CHIP and Science Act ($39B in USA for factory building grants) cannot change slowing consumer demand in personal computers and cell phones.
Taiwan Semiconductor Manufacturing (TSM)
- World’s largest chip foundry and a technology leader
- TSMC’s revenue rose 43% to 625.53 billion Taiwanese dollars
- Warren Buffett’s Berkshire Hathaway owns $4 billion worth of TSMC ADRs
- Selling at 14.5x 2024 consensus EPS of $6.54
- Dividend yield 1.83%
Advanced Micro Devices (AMD)
- Major player in its business areas — data center and PC CPUs and GPUs
- Revenue of $23.6 billion was up 44% over 2021
- Bright spot in its data center unit mitigating negative macro impacts
- Selling at 21x 2024 consensus EPS of $3.97