What happened
Shares of Taiwan Semiconductor Manufacturing Company (TSM 1.26%) jumped more than 2% in morning trading Tuesday before settling down to an 0.8% gain as of 3 p.m. ET. This isn't a huge gain -- but it's enough to erase the stock's losses in response to a reported revenue decline yesterday.
So what
Taiwan Semiconductor's news yesterday was either bad (as it was viewed at the time) or good (as investors seem to be rethinking it today), depending on how you look at it. On the one hand, fiscal Q2 2023 revenue totaled just $15.3 billion, a 10% year-over-year decline. On the other hand, the decline may not have been quite as bad as some analysts expected.
According to a Bloomberg report on the news, "the drop was not as bad as feared," and Yahoo! Finance estimates had analysts forecasting a decline of closer to 15%. Long story short, semiconductor sales are definitely down year over year, which sounds bad -- but the news could have been worse.
Now what
What also seems clear is that in commenting on the numbers, Taiwan Semiconductor highlighted a "boom" in customers spending on semiconductor chips for artificial intelligence (AI) purposes. This reinforces the view that even if sales are slowing now, hope remains intact for a quick rebound in chip sales as more and more companies invest in AI.
Meanwhile, TSM's bad-or-good news appears to be unqualified good news for one of its biggest customers, Nvidia (NVDA 6.18%). According to Bloomberg, Nvidia's AI accelerator chips are "widely seen as the best hardware for training large data models such as the one underpinning OpenAI's ChatGPT." And seeing as TSM is Nvidia's contract manufacturer for these chips, the fact that TSM reported a smaller sales decline than feared in Q2 implies that Nvidia might see better sales than forecast, as well.
Nvidia is due to report its own earnings next month on Aug. 23, by the way. Fingers crossed.
