Shares of semiconductor giants Broadcom (NASDAQ:AVGO), Intel (NASDAQ: INTC)And Taiwanese semiconductor manufacturing (NYSE: TSM) on Friday they all marched higher Bank of America Analyst Vivek Arya was quoted encouraging investors to invest in the “generative capex cycle in generative AI infrastructure.”
Capex is an abbreviation for capital expenditure. Broadcom, TSMC and Intel are chipmakers considered part of the aforementioned “capex cycle” because they produce the semiconductor chips that AI companies need to buy if they want their artificial intelligence (AI) programs to function. As of 1 p.m. ET, shares of Broadcom were up 2.5%, Intel was up 3.5% and Taiwan Semiconductor Manufacturing, also known as TSMC, is doing the best of all, with a gain of 3.6%.
So that’s the big picture underlying today’s moves in semiconductor stocks in general. But why are these three stocks moving? specifically? Well, in the case of Broadcom, the answer is obvious: next to NvidiaArya named Broadcom as his top pick among AI stocks.
Intel and TSMC, on the other hand, have additional catalysts worth highlighting.
As Nvidia’s company of choice for contract manufacturing of its chips, it is assumed that whatever is good for Nvidia is also good for TSMC. Additionally, TSMC got some particularly good news last night when Bloomberg reported that the company’s new advanced 4-nanometer chip factory in Arizona is generating “yields” of 4% more usable chips than comparable TSMC production plants in Taiwan. This fact should translate directly into more sales and higher profitability for TSMC, prompting a company spokesperson to call the figure “very satisfactory, with a very good return.”
TSMC additionally committed to beginning “volume production” at the plant in early 2025, which will allow the company to capitalize on these efficiency gains and potentially increase TSMC’s chances of taking advantage of U.S. government subsidies under the Chips Act.
Indeed. What about Intel?
I wish I had better news to share on this front, but here’s the really skinny news: Aside from the broad enthusiasm for chip stocks generated by Arya’s encouragement, Intel shares appear to benefit the most today from an update on plans to boost the to expand chip production in Ohio. Specifically, the company’s website states that “Intel plans to invest more than $28 billion to build two new industry-leading chip factories in Ohio to boost production to meet demand for advanced semiconductors.”
That sounds like good news – as if Intel is moving forward and trying to take advantage of Arya’s “generational capex cycle in generative AI infrastructure” just as TSMC is doing.
But the point is: Intel announced its $28 billion investment in Licking County, Ohio back in January 2022, and today’s update doesn’t change that announcement, nor does it indicate any acceleration in production or the size of the investment of the company. Rather, according to Intel’s own web page, the “latest update” on the company’s plans in Ohio consists of “Photos and b-roll video of the ‘Ms. Armstrong’ crane [that] were added on October 25, 2024.”
So basically, all Intel said today is that the same production plans that have been in place for the past almost three years are still in place, and unchanged. That hardly seems like a good reason for the rise in Intel stock today, especially considering that with less than $1 billion in annual income, Intel is by far the least profitable of these three semiconductor companies — and the only one with cash ($12.6 ) burns. billion in the last twelve months).
If I had a choice to invest in any of these three companies, I would put TSMC stock, which trails earnings by 27 times, is cash-rich and generates ample free cash flow, at the top of the list – and Intel stock all the way at the bottom. the bottom.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Rich Smith has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Bank of America, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and Intel and recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.
Why Intel, Broadcom and Taiwan Semiconductor Stocks Popped Today was originally published by The Motley Fool
