Wall Street Banks Like Goldman Turn Pessimistic on World’s Biggest Chipmaker TSMC

Jeanny Yu, Bloomberg News

(Bloomberg) -- Wall Street banks are turning bearish on Taiwan Semiconductor Manufacturing Co., cautioning that the world’s biggest chipmaker will issue conservative guidance for its revenue outlook due to weak demand.

The primary chipmaker for Apple Inc. is scheduled to report earnings for the last quarter on Jan. 12, when it is also expected to share the guidance for this year’s outlook. Both Goldman Sachs Group Inc. and UBS Group AG expect TSMC’s sales to be flat in 2023, with UBS cutting its price target on the company by 7.4%.

“TSMC is not immune to the industry inventory digestion and end-demand correction into 2023,” UBS analysts led by Sunny Lin wrote in a note on Tuesday. “We lower our 2023 revenue estimate from 3% growth to flat YoY in USD, considering the weaker consumer demand and decelerating high-performance computing growth.”

As a supplier to the largest names such as Nvidia Corp., TSMC is regarded as a barometer of global electronics demand. Its shares have lost 34% from a peak last January as spending on big-ticket items from smartphones to laptops and servers plunged after central banks hiked interest rates to deal with mounting inflation, while much of the world grappled with a potential recession. TSMC’s key client Apple’s market value has slid below $2 trillion amid demand concerns.

Chips’ Failed Rally Leaves Them Historically Cheap: Tim Culpan

TSMC’s sales probably rose 43% in 2022, and the growth is seen slowing to 6.3% in the current year, according to the consensus of analysts’ forecasts compiled by Bloomberg.

While a healthy recovery is expected in second half of the year, “the pace of demand rebound could be slower than the company expects as there is still lack of clear signs of end demand recovery,” Goldman Sachs analysts Bruce Lu and Evelyn Yu said in a note.