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A major chipmaker is getting a lot of love on Wall Street — and no, it’s not Nvidia . Taiwan Semiconductor Manufacturing Company posted third-quarter results Thursday that topped analysts’ expectations. While the company reported its largest profit decline since 2019, it signaled a looming end to a difficult inventory correction. The news prompted some bullish reactions on Wall Street, with Goldman Sachs analyst Bruce Lu adding the semiconductor stock to the firm’s conviction list as it shows signs of stabilizing demand and approaches a “new growth chapter.” TSM 5D mountain Taiwan Semiconductor shares since the start of the week “After a prolonged inventory digestion cycle, we expect a broad-based recovery of TSMC’s [utilization rate] in 2024E as supported by 1) re-stocking demand, 2) PC/server demand resumption and stabilizing smartphone demand,” he said in a Friday note. The Taiwan-based semiconductor company plays an integral role in the attention-grabbing artificial intelligence chipmaking industry, supplying products to Apple , Nvidia and Advanced Micro Devices . Despite the recent tightening of restrictions around AI chip sales to China, Lu views AI as a critical growth opportunity for the company, expecting capacity to double by the end of 2024 and grow another 50% in 2025 to accommodate a demand uptick. Lu lifted the firm’s price target to $115 a share, reflecting about 24% upside from Thursday’s close. U.S.-listed shares have already gained more than 26% since the start of 2023. Goldman Sachs isn’t the only firm turning more bullish on the stock. On the heels of Taiwan Semiconductor’s results and guidance lift, Bank of America analyst Brad Lin lifted his 2023 earnings estimate 2%. Meanwhile, JPMorgan analyst Gokul Hariharan boosted 2024 and 2025 estimates 5% and 1%, respectively, adding that earnings per share forecast cuts for the company appear to be nearing a bottom. The ramp of its N3 node should also support strong growth in 2025, he added. TSM YTD mountain Shares have surged more than 26% since the start of 2023 Investors may need to weather some “seasonality” in the first quarter of 2024 and brace for what will likely be an uncertain and slow recovery, Hariharan wrote. However, now may mark an opportune time for long-term investors to get into a company poised to experience mid- to high-teens growth in 2024. “With utilizations at ~80% and inventories close to bottoming out, we believe that the market focus could now shift to longer- term dynamics,” such as stronger high-performance computing platform growth, gross margin expansion and its AI chip position, he wrote. — CNBC’s Michael Bloom contributed reporting.
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