Adding to 2 Tech Stock Positions
Here's why Taiwan Semiconductor's results and guidance have us increasing our holdings in Nvidia and Universal Display and also support two additional names in the portfolio.
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* We are adding to Nvidia and Universal Display after results and guidance from Taiwan Semiconductor.
* TSM’s results and guidance also back our Qualcomm and Marvell positions.
* TSM sticks with 2024 capex plans, supporting shares of Applied Materials.
| Symbol | Transaction Type | #Shares Traded | Recent Price ($) | Shares Owned After Trade | % Portfolio |
|---|---|---|---|---|---|
NVDA | Buy | 30 | 848 | 145 | 3.0 |
OLED | Buy | 70 | 151.50 | 895 | 3.3 |
After you receive this Alert, we will make the following trades:
-- Buy 30 shares of Nvidia NVDA at or near $848. Following the trade, NVDA shares will account for roughly 3.0% of the portfolio.
-- Buy 70 shares of Universal Display OLED at or near 151.50. Following the trade, OLED shares will account for roughly 3.3% of the portfolio.
We are stepping further into our positions for Nvidia and Universal Display following this morning’s March-quarter earnings report from Taiwan Semiconductor TSM, which showed meaningful year-over-year strength in both smartphone and High-Performance Computing (HPC). Moreover, TSM's guidance implies the year-over-year strength in those markets will continue in the current quarter, which supports today’s action and also our bullish stance on Qualcomm QCOM and Marvell Technology MRVL. While the portfolio is full up on those latter two positions, relative to our price targets the recent pullback in both of those shares offers ample upside to our respective price targets of $200 and $95.
With all of these positions, our time horizon is the coming quarters, not the next few weeks, as the AI market matures and the expected AI-on-device upgrade cycle takes hold, driving additional data center, network, and carrier infrastructure demand.
TSM’s Results and Guidance
Following last week’s March revenue report, we knew TSM’s March-quarter revenue was going to be strong. What we were looking for was the end-market mix that is divulged in its earnings presentation. Digging into that data, while we saw TSM’s smartphone revenue fell 15% sequentially, typical given the seasonality of that market, on a year-over-year basis it rose just over 26%, confirming the improving market outlook that led us to nibble on OLED shares earlier this week. HPC segment revenue climbed 2.9% sequentially following the record December quarter and was up 18% compared to year-ago levels. Those figures show there is little question that AI and data center demand was strong during the quarter.
While that was very confirming for what we’re going to see from our holdings when they report their quarterly results in the coming weeks, we were far more interested in TSM’s guidance for the current quarter. Not only is TSM’s Q2 2024 top-line guidance of $19.6 billion-$20.4 billion up sequentially but compared to Q2 2023 it is up a staggering 25%-30%. Based on end-market patterns, this implies continued strong year-over-year demand for both HPC and smartphone.
TSM management said that AI servers are expected to account for a low-teens percentage of its 2024 revenue, more than double from last year, with that figure rising to more than 20% of revenue by 2028. We see that supporting Nvidia’s strong outlook but also Marvell’s AI chip efforts with Microsoft MSFT, Alphabet (GOOGL), and Amazon AMZN.
TSM Maintains 2024 Capital Spending Plans
Given TSM being the largest chip foundry, we also keep tabs on its spending plans for chip equipment. The company reaffirmed plans to spend $28 billion-$32 billion this year compared to $30 billion last year with 70%-80% of that for advanced technologies. We will be reviewing capital spending plans from Intel INTC and GlobalFoundries GFS when they report, but TSM’s affirmation is positive for our shares of Applied Materials AMAT.
(Please note that we are looking to execute these trades at or near the share price mentioned above. Once the trade is completed, subscribers can see the trade's executed price here. Be sure to toggle the chart to sort by Purchase Date.)
At the time of publication, TheStreet Pro Portfolio was long NVDA, OLED, QCOM, AMAT, MSFT and AMZN.
