Nvidia is not the only stock that could cash in big on its earnings when results are reported Wednesday after the bell, according to Morgan Stanley. Its supplier Taiwan Semiconductor Manufacturing Company could get a boost if Nvidia's latest quarter, as well as its forward guidance, continue to suggest a strong outlook for chips that power artificial intelligence applications, analysts led by Charlie Chan wrote Sunday. Nvidia shares were slightly higher in light trading Tuesday ahead of results.
U.S. shares of Taiwan Semiconductor were little changed so far in the session.
Taiwan Semiconductor, the sole supplier for graphics processing units for Nvidia, is expected to get 15% of its total revenue in 2024 from AI-related demand, the Morgan Stanley analyst said. That means a beat in Nvidia's revenue guidance for the quarter ending October should be a major catalyst. "We would expect TSMC's share price to rise if NVDA's guidance were to beat expectations," Chan wrote.
TSM 1D mountain Taiwan Semiconductor The Wall Street investment bank came up with three possible scenarios for Nvidia's earnings this week: Scenario 1: Nvidia's October revenue guidance beats buyside expectations, topping $33 billion. This would drive a 3% jump in Taiwan Semiconductor's stock price. Scenario 2: Nvidia's guidance matches buyside estimates of $31.
5 billion. That would drive a 1% rise in Taiwan Semiconductor. Scenario 3: Nvidia's guidance misses investors' expectations, coming in below $31 billion.
Taiwan Semiconductor falls 2%. Morgan Stanley has assigned 50% odds that Nvidia's outlook will meet expectations, a 30% likelihood that Nvidia will beat buyside estimates and a 20% chance it will miss. NVDA 1D mountain Nvidia.
