The latest figures from a semiconductor manufacturer reveal a significant increase in sales among its major clients.
Among the top chip makers, Nvidia and Broadcom are both heavily dependent on a single supplier for their advanced semiconductors. That supplier, Taiwan Semiconductor Manufacturing (TSMC), stands as the leading producer of cutting-edge chips. Thanks to its technological advancements and capacity for mass production, TSMC has become a key player for companies wanting to utilize the latest semiconductor technologies. As such, any news from TSMC carries substantial weight for its largest customers.
Recently, TSMC shared new data that should reassure investors in Nvidia and Broadcom.
Growing Demand for Advanced Chips
Besides its quarterly financial updates, TSMC also publishes monthly sales figures, providing a glimpse into its financial health and broader industry trends.
In September, sales soared by 31.4% to NT$330.98 billion, bringing the total for the quarter to NT$989.92 billion, which exceeds the company’s guidance of NT$957 billion. This positive trend was noted in previous monthly reports, and although there were worries about potential order drops, the September figures aligned closely with expectations from prior months.
This indicates that TSMC is still receiving substantial orders from notable clients like Nvidia, Broadcom, and various AI chip producers. It seems that demand for TSMC’s services remains robust, which is further supported by recent collaborations among tech firms aiming to ramp up investments in AI-chip development.
These trends may contribute to TSMC’s ongoing revenue growth, especially as it prepares to release its third-quarter results and projections for the fourth quarter on October 16th—information that could provide deeper insights into the semiconductor sector.
Is Now the Right Time to Invest in Nvidia or Broadcom?
TSMC’s sales figures point to solid quarterly performance for clients like Nvidia and Broadcom, but the market has already set high expectations for these firms. Analysts predict Nvidia’s revenue could rise by 55% year-over-year over the next two quarters, while Broadcom is expected to see growth rates of 24% and 22% in the same timeframe.
The outlook for Broadcom next year looks even brighter, with around $10 billion expected from new custom chips for OpenAI, which could boost sales growth to 33%. Though competition may become fiercer for Nvidia—especially from Broadcom—analysts still forecast a 33% revenue uptick for the GPU leader.
This year, stock prices for both companies have seen increases of approximately 40%, leading to higher valuations. Nvidia’s expected price-to-earnings (P/E) ratio sits around 42, while Broadcom’s is at about 49.
Analysts are optimistic about each company’s earnings growth this quarter, supported by TSMC’s sales data, but any unfavorable results might negatively impact the stock price considerably due to their high valuations.
For those eyeing investments in AI chip stocks, TSMC could be the more appealing choice. Although sales and profit growth may taper off starting in the fourth quarter of this year, its stock remains relatively affordable, trading at around 29 times expected earnings, especially considering its recent price surge since early September.
With a significant competitive edge and a broad customer base, TSMC provides investors an opportunity to capitalize on increased AI chip spending without being tied to a particular chip design. Those contemplating investments in companies like Nvidia or Broadcom might want to hold off for a more favorable entry point.
