Please note that this article does not constitute investment advice. The author currently holds no positions in any of the stocks referenced herein.
Recent Insights from Bernstein: NVIDIA and TSMC
Bernstein has released its latest analysis focusing on two significant events in the semiconductor industry: NVIDIA’s current stock decline and TSMC’s substantial investment commitment in the United States.
NVIDIA: Stock Decline Analysis
NVIDIA’s shares are experiencing a notable downturn, affected by growth anxieties, supply chain disruptions, and mounting tariff and regulatory concerns. According to Bernstein analyst Mark Li, the company’s stock has consistently underperformed compared to its counterparts and the broader market. While the SOX index has decreased by 8% this year, the S&P 500 has seen only a 1% dip, whereas NVIDIA has lost about 15% year-to-date.
Market Position and Historical Performance
In his analysis, Li highlighted that after the recent downturn, NVIDIA is trading at around 25 times next year’s earnings—its lowest valuation in a year and approaching levels not seen in nearly a decade. Li remarked:
“After yesterday’s rout the stock trades at ~25x NTM earnings, their weakest level in a year and close to 10 year lows. In fact, the stock now trades BELOW parity relative to the SOX (something we have seen only once or twice in the past decade).”
Li remains optimistic despite fears regarding the sustainability of the AI market, arguing that such apprehensions may be “premature.” He emphasized that major hyperscalers are continuously raising their capital expenditure forecasts, a sign of ongoing investment in a burgeoning product cycle, especially with the upcoming GTC event just around the corner.
Potential for Recovery
Investors who previously purchased NVIDIA shares at similar earnings multiples have historically reaped substantial rewards, averaging a 150% return over the subsequent year. This trend highlights potential opportunities for savvy investors willing to navigate current volatility.
TSMC’s Mega Investment in the U. S.
Turning to Taiwan Semiconductor Manufacturing Company (TSMC), Mark Li discusses the company’s recent announcement to invest an additional $100 billion in the U. S., which builds on an earlier commitment of $65 billion. This investment is earmarked for the establishment of three new fabrication plants, two advanced packaging centers, and a significant research and development facility—marking the largest foreign investment ever in the United States.
Strategic Implications for TSMC
Li asserts that this extensive investment will allow TSMC to maintain a competitive edge over Intel, which has been pressuring TSMC to collaborate more closely, potentially sharing technology or establishing joint ventures. It’s critical to note that this hefty financial commitment may increase TSMC’s cost pressures, although it will be somewhat alleviated by the $6.6 billion subsidy from the CHIPS Act, which is currently less susceptible to cuts. Additionally, TSMC will have flexibility regarding construction timelines, helping to manage costs while potentially recouping expenses through pricing power and operational efficiencies.
Advanced Packaging Facilities and Future Prospects
Furthermore, Li points out that Amkor has pledged to enhance CoWoS (Chip-on-Wafer-on-Substrate) capacity in the U. S.However, its inability to provide CoWoS-L and hybrid bonding solutions puts it at a disadvantage for meeting the growing demands of companies like NVIDIA and AMD. TSMC’s initiative to establish two advanced packaging centers in America is poised to address this bottleneck, reinforcing its critical role in the semiconductor supply chain.
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