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Semis Riding October's High

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Semiconductor shares surged in October, with almost all of my favorite semiconductor stocks jumping over 10% since the beginning of October. Nvidia (NVDA - Free Report) and AMD (AMD - Free Report) are leading the charge with gains of 20.2% and 26.4% since October 1st, respectively.

I believe that the big push is from positive financials of TSMC’s (TSM - Free Report) earnings results in early October. TSMC has been driving the semiconductor segment for decades. This firm just became the most valuable semiconductor company in the world, replacing the long-standing industry leader Intel (INTC - Free Report) , but no one is talking about it.

TSMC is not as sexy a company as Nvidia or Intel, but it is a necessity to the technology ecosystem. TSMC is a foundry, which manufactures semiconductors for some of the biggest names in the industry. Most recently, the firm has been working side by side with its cohorts to innovate for the future.

Building for The Future

At the forefront of this firm’s product offering is innovation and the aptitude to be the backbone of the 4th industrial revolution. TSMC creates 85% of the world’s semiconductor prototypes. Its Open Innovation Platform supports start-ups and enterprises alike by reducing design barriers are improving first-time integrated circuit (IC) success.

TSMC has seen more semiconductors than any other company in the world. They are not only working at the largest scale but also with the most state-of-the-art technology to improve a firm’s “design time, time-to-volume, time-to-market, and ultimately, time-to-revenue,” according to TSMC IR site.

TSMC’s customers include the most influential semiconductor innovators and tech firms in the world. Companies like Nvidia (NVDA - Free Report) , Broadcom (AVGO - Free Report) , Qualcomm (QCOM - Free Report) , and even Apple (AAPL - Free Report) . The most trusted tech names in the world turn to the most trusted semiconductor foundry on the globe for their manufacturing and innovative needs.

More and more tech companies are turning to foundries for their IC production needs as the technology required to compete becomes impossible to produce in-house. TSMC provides the greatest technology and scale that would improve a business’s IC cost and capabilities. Samsung and TSMC have recently teamed up in the development of 5-nanometer transistors, which would give it the ability to put 30 billion transistors onto a chip the size of your fingernail.

This company has an enormous amount of growth ahead of it. Its realized economies of scale have rippled through the company’s financials, positioning it to reap the benefits from the next wave of hyperscaling, AI development as well as the implementation of 5G technology.

Intel Falling Behind the Curve

Intel has fallen behind this pure-play foundry in recent years. The industry giant has been experiencing production delays and innovation lapses. TSMC is partnering with the world’s greatest technology firms, and together, they are creating groundbreaking technology. Intel works more or less as a lone wolf, and this has put them marginally behind the curve. Below is a year to date chart comparing their stock returns (TSM-Blue, INTC- Red).

Upcoming Earnings

Both TSMC and Intel reported robust Q3 results, and this has rippled through the semiconductor sector as a resurgence in growth becomes apparent. Below is a list of upcoming earnings releases in this space. (QCOM - Free Report) , (NVDA - Free Report) , (ADI - Free Report) , (AVGO - Free Report) , (MU - Free Report)

Take Away

Semi stocks have been on high over the past month. Growth is now back in now being priced back into the picture. INTC and TSM both set a good precedent for the segment’s Q3 results. These two semi behemoths provide clues as to what to expect in the remaining reports.

 

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