Nvidia (NVDA, Financials) reported strong earnings and guidance, reinforcing the outlook for Taiwan Semiconductor Manufacturing Company Limited (TSM, Financials) amid ongoing growth in artificial intelligence.
Analysts pointed out that Taiwan Semiconductor keeps gaining from its status as a major provider of artificial intelligence-driven technology.
According to Bank of America (BAC, Financials) analyst Brad Lin in a client letter, Nvidia's performance underlines ongoing artificial intelligence demand and supports Taiwan Semiconductor's superior technological capacity. He cited as a favorable indicator for Taiwan Semiconductor's average selling price rise Nvidia's consistent one-year cadence for datacenter graphics processing unit development.
Lin, who rates Taiwan Semiconductor a Buy, noted that the great value Taiwan Semiconductor offers its consumers shows in Nvidia's gross product margin forecasts for next year.
"Accelerated product launches enhance visibility for TSMC's [average selling price] growth and supply chain dynamics," Lin wrote. Furthermore underlining Taiwan Semiconductor's position in the semiconductor sector is artificial intelligence-driven demand, he said.
Supporting Lin's research, Citi (C, Financials) analyst Chia Yi Chen pointed to plans by Taiwan Semiconductor to double its chip-on- a-wafer-substrate capacity by 2025. Chen said Nvidia is still a major force behind the expansion of AI business of Taiwan Semiconductor.
Both experts underlined how demand for leading-edge technology of Taiwan Semiconductor is driven by sophisticated AI model scaling.
