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Chipmakers Like Nvidia Set to Ride Taiwan Semi's Coattails After Strong Earnings

Chip and graphics card makers are set to benefit from Taiwan Semi’s ongoing strong sales momentum, which has been driven by tight supply in the semi market.

Chip and graphics card makers including Nvidia  (NVDA) - Get NVIDIA Corporation Report, Applied Materials  (AMAT) - Get Applied Materials, Inc. Report and Advanced Micro Devices  (AMD) - Get Advanced Micro Devices, Inc. Report are set to benefit from Taiwan Semiconductor’s  (TSM) - Get Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR Report ongoing strong momentum, which has been driven by tight supply in the semiconductor market due to the ongoing chip shortage.

Taiwan Semiconductor on Thursday said it expects sales to rise more than 20% in 2021, affirming its crucial role in helping alleviate a global chip shortage that’s slammed production of everything from cars and trucks to dishwashers and toys.

Taiwan Semiconductor CEO C.C. Wei said the company expects semiconductor supply to remain tight into 2022, though it will ramp up production of microcontrollers by close to 60%, which will at least help reduce the chip shortage for its automobile clients, which include the likes of Ford  (F) - Get Ford Motor Company Report, Tesla  (TSLA) - Get Tesla Inc Report and others.

Revenue in the current quarter is expected to rise to between $14.6 billion and $14.9 billion, in line with the $14.7 billion average of analyst estimates. TSMC’s 2021 sales outlook is expected to surpass earlier estimates of 20% growth in full-year sales.

Real Money's Stephen "Sarge" Guilfoyle: Taiwan Semiconductor Is Ripe for Entry

That, in turn, is expected to benefit the likes of Apple  (AAPL) - Get Apple Inc. (AAPL) Report, one of Taiwan Semiconductor’s biggest partners, as well as the likes of Nvidia, Applied Materials and AMD, which could ride the coattails of continued strong semi demand and higher prices.

TheStreet Recommends

“You know what is tiresome? The temporary decline of semis for no real reason just causes such angst as opposed to buying,” TheStreet’s Jim Cramer noted in a recent Real Money column. This fabulous group is a ball of confusion until you look where they come from.”

Indeed, main chip and graphics cards makers as well as other semiconductor producers will continue to benefit from demand, particularly in computers and electronics, which Cramer noted make both semi makers and other peripheral computing equipment makers like Texas Instruments  (TXN) - Get Texas Instruments Incorporated Report, Analog Devices  (ADI) - Get Analog Devices, Inc. Report, Broadcom  (AVGO) - Get Broadcom Inc. Report and Marvell Tech  (MRVL) - Get Marvell Technology Group Ltd. Report strong potential growth candidates.

And not just lack of supply: Nvidia, which has been pegged a cryptocurrency play due its graphics cards being the equipment of choice for mining Ethereum, longer-term demand for advanced gaming, graphics and "gamification" of real-life applications used by consumers and businesses make Nvidia an undervalued play, Cramer said. 

"Only one stock could possibly be called a perennial and that's the first and most obvious one, Nvidia, the artificial intelligence gaming platform company, two of the multiple ways I could have chosen to describe it."

Separately, Mizuho Securities on Thursday raised its one-year price target on Nvidia to $900 from $710. At last check, shares of Nvidia were down 2.25% at $775.79.

Advanced Micro Devices, Broadcom, Marvell, Nvidia and Apple are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.