Daily Digest:
w/c 24th June - a relatively light data week, with spotlight on US GDP and Durable Goods Wednesday, then the Fed’s preferred inflation measure, the MoM and YoY PCE data on Friday

Apple And TSMC Drive Tech Stocks Higher


TSMC Stocks Surge, with Positive 2024 Outlook due to Continued Apple Collaboration and AI Boom

Who are TSMC?


Taiwan Semiconductor Manufacturing Company (TSMC) stands as a global giant in the semiconductor industry, boasting a market capitalization of 486.28 billion and commanding a pivotal role in the manufacturing landscape. Established in 1987, TSMC has evolved into the world’s largest independent manufacturer of semiconductor chips, often referred to as the “foundry” for other companies. The company specialises in cutting-edge technology and advanced semiconductor fabrication, playing a crucial role in the development and production of a wide array of electronic devices. 

Known for its commitment to innovation and precision, TSMC’s influence extends beyond its native Taiwan, shaping the global semiconductor ecosystem and contributing significantly to technological advancements in various industries. With a focus on delivering leading-edge solutions, TSMC continues to be a linchpin in the ever-evolving world of semiconductor manufacturing.

Why Have TSMC Stocks Surged?

Apple supplier Taiwan Semiconductor Manufacturing Company released a robust outlook for 2024, exceeding expectations, mainly driven by anticipated gains from the artificial intelligence (AI) boom. The key factors in TSMC’s optimistic 2024 outlook are its strong position in the AI tech sector and its crucial relationship with Apple. 

TSMC’s American depositary receipts (ADRs) surged over 7% in intraday trading following the release of its 2024 forecast. The chipmaker reported fourth-quarter fiscal 2023 earnings per share (EPS) of $1.44, surpassing the forecasted $1.38. The company’s revenue for the same period stood at $19.62 billion, slightly exceeding the predicted $19.61 billion.  TSMC anticipates revenue between $18 billion and $18.8 billion for Q1 2024, showing confidence in the ongoing AI-driven market growth. 

Executive Chairman Mark Liu emphasised Taiwan’s potential to become a significant player in AI, describing the current AI innovation as just the tip of the iceberg. TSMC’s 2024 capital budget is expected to range between $28 billion and $32 billion, emphasising a commitment to advanced process technologies. Analysts view this bullish outlook to be fueled by optimism around AI contributions, favourable end market trends, and TSMC’s continued collaboration with Apple, causing ADRs to surge 7.3% to $110.41.

Apple stocks surge – upgraded by bank 

Apple Faced Trouble Early in the New Year

Apple faced challenges in the new year as Piper Sandler issued its second downgrade of the tech giant within a week, citing concerns about iPhone demand. This rating action led to an 8-week low for Apple’s stock and a total market value decline of nearly $170 billion in the opening week of 2024. Despite these setbacks, Apple remains the most valuable company globally, with a market capitalization exceeding $2.8 trillion. 

The recent downgrades from Piper and Barclays, echoing concerns about handset inventories and peaking growth rates, have not deterred all analysts, as at least 27 still maintain a “buy” or higher rating. The company has been grappling with a demand slowdown since early last year, particularly in China, and faces additional challenges from an ongoing patent dispute and a strong U.S. dollar. Piper Sandler downgraded Apple’s stock to “neutral” from “overweight” with a reduced price target of $205, aligning with Barclays’ recent downgrade to a rating equivalent to “sell.”

The patent trouble comes as a US federal appeals court has barred the importation of Apple Watches capable of reading blood-oxygen levels, while Apple challenges the government decision claiming patent infringement. The ruling, effective from January 18, mandates a halt to imports of the affected watches, but it’s anticipated that Apple will remove the blood-oxygen reading feature from the Series 9 and Ultra 2 models to avoid disrupting sales in one of its major markets. 

Apple watch

The patent dispute, initiated by medical technology company Masimo, alleges that Apple hired away its employees and stole pulse oximetry technology for its watches. Apple’s wearables, home, and accessory business, including the Apple Watch, generated $8.28 billion in revenue during Q3 2023. The legal battle could take up to a year to resolve.

Apple Stocks Respond With Surge

Bank of America has upgraded Apple’s stock to “Buy” from “Neutral” with a price target increase to $225 from $208, citing a potential 23% upside. The key driver behind the upgrade is the bank’s belief that AI technologies integrated into iPhones will spur a robust upgrade cycle in 2025 and 2026. Bank of America anticipates strong demand for upgrades from iPhone users still on older devices, particularly as AI-enabled apps increasingly require higher processor power. 

The bank’s internal surveys indicate that over 70% of iPhone users are currently using iPhone 13 or older models. Potential AI features for future iPhone models include live voice translations, enhanced camera zoom functions, improved text and email editing tools, and a fully integrated large language model. The bullish call also considers higher growth in Apple’s Services division, increased profit margins, ongoing capital returns through stock buybacks and dividends, and solid sales of the upcoming Vision Pro device. Apple’s stock rose over 3% following the upgrade.

Editor in chief

Steve Miley is the Market Chartist and has 32 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued

Comments on this analysis

Your email address will not be published. Required fields are marked *