HomeBusinessWhy AMD, TSMC, and Broadcom Stocks Are All On the Rise Today

Why AMD, TSMC, and Broadcom Stocks Are All On the Rise Today

After falling on Tuesday, shares of semiconductor stocks are down Advanced micro devices (NASDAQ: AMD), Broadcom (NASDAQ:AVGO)And Taiwanese semiconductor manufacturing company (NYSE: TSM) are all up again on Wednesday morning, up 2.8%, 2.8% and 5.1%, respectively, through 11:05 a.m. ET.

Two key factors appear to be driving today’s outperformance: overall global trends in semiconductor demand and… the US government.

The demand for semiconductors is growing

First things first. On Monday, the trade group Semiconductor Industry Association (SIA) reported that global semiconductor sales fell slightly in January 2024 compared to December 2023 (down 2.1%), but rose dramatically compared to the year-ago period. January 2024 sales totaled $47.6 billion, up 15.2% year-over-year from January 2023 – the largest year-over-year increase in monthly sales since May 2022, the association noted.

The SIA described January’s results as a strong start to the year and predicted that as 2024 progresses, global semiconductor sales will continue to grow at double-digit rates compared to 2023. For now, it appears much of this growth is concentrated at just a handful of companies — Nvidia and its contract manufacturer TSMC are notable winners – so it’s not 100% certain that every single semiconductor stock will grow this year.

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But it’s certainly better news than a semiconductor sales report to delay would have been.

America first (or at least second)

At a more detailed level, the SIA report noted that semiconductor sales growth was fastest in China (sales up 26.6% year-over-year) and second fastest in the US (sales up 20.3%) – which brings us to our second point today, which affects the prices of AMD, Broadcom and TSMC stock prices: the US Chips Act.

As Reuters reports today, “nearly $30 billion” of U.S. government subsidies awarded to semiconductor makers under the Chips Act will start flowing in the coming weeks. Again, it is not 100% certain at this time who will benefit from this largesse. Reuters reports this IntelSamsung and TSMC are all “likely” to receive subsidies under the Chips Act, while it’s less clear how much Broadcom and AMD could benefit — and for now, the Commerce Department remains mum on who gets how much of the money.

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Until we know more, investors are probably best off keeping their focus on valuation. And in that regard, TSMC appears to be the safest of the three stocks to invest in today, at 26 times earnings. Broadcom shares cost at least 50% more at a valuation of 41 times earnings, and AMD appears to a lot of more expensive with a price-earnings ratio of 387 (!).

Granted, TSMC also has the lowest expected earnings growth rate of the three stocks: 11%, versus 14% for Broadcom and 52% (also “!”) for AMD. On the plus side, that more conservative growth rate also means that TSMC has the lowest hurdle to clear – and the greatest chance of beating expectations and delivering a positive earnings surprise for investors.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.

Why AMD, TSMC, and Broadcom Stocks Are All Up Today was originally published by The Motley Fool

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