Chipmaking giant TSMC issued an upbeat demand outlook, sparking a rally in chipmaker stocks across Asia and driving broader market gains. However, Chinese tech shares lagged amid ongoing regulatory pressures.
TSMC Forecasts Double-Digit Sales Growth Through 2024
Taiwan Semiconductor Manufacturing Co (TSMC) – the world’s largest contract chipmaker – forecast sales growth of over 10% in 2024 on brisk demand for high-performance computing chips. TSMC predicts strong growth in both smartphone and high-performance computing chips, driven by new product launches and recovering demand post-pandemic.
TSMC expects to increase capital spending to between $40-44 billion in 2024 to expand production capacity, particularly for advanced 3nm and 2nm manufacturing processes. The company’s planned investments in AI, HPC, and other cutting-edge technologies positions it to capture growth opportunities in areas like data centers, AI, and IoT.
TSMC’s bullish guidance boosted shares over 10% and lifted semiconductor firms across the region. Investors are betting continued chip shortages and strong demand from high-growth sectors will drive sales and profits higher for TSMC and peers in 2024.
Asia Tech Shares Surge on Upbeat Outlook
Shares in Asian tech and semiconductor companies rallied, tracking gains in their US counterparts as optimism grows over tech spending and demand in 2024.
Key stocks like Samsung Electronics and Tokyo Electron rose over 5% as analysts pointed to TSMC’s strong guidance and expectations of recovering global tech hardware sales lifting the entire sector. The rally in Asian chip-related shares could continue, with inventory rebuilding still in early stages and demand likely to remain resilient.
However, shares in Chinese tech firms like Alibaba and Tencent slipped as stricter regulations continue weighing on the sector. Investors remain cautious on Chinese tech and internet firms given unpredictable government oversight.
Global Stocks Build on Wall Street Gains
Asian markets tracked gains on Wall Street, with Japan’s Nikkei rising over 2% to hit a three-week high as the yen weakened boosting exporter shares. Both the S&P 500 and Nasdaq hit record closing highs overnight, recovering nearly all losses from earlier in the week.
Upbeat earnings and guidance from major US banks and tech firms drove gains on Wall Street last week. Investors are hoping resilient consumer demand and easing supply chain snarls will support corporate profits in 2024 after a challenging 2022.
In currency markets, the US dollar edged lower while the Japanese yen rebounded from a seven-month low. Hawkish Fed policy divergence continues favoring US dollar strength, though improved risk appetite led traders to take profits on crowded dollar long positions.
Outlook Remains Uncertain Despite Recent Optimism
While guidance from major tech firms indicates demand is recovering post-pandemic, significant uncertainties persist heading into 2024. Surging inflation, rising interest rates, the war in Ukraine, and COVID’s reopening impact in China all pose risks to the global economic outlook.
Any renewed slowdown in economic activity or drop in corporate earnings growth could quickly dampen investor enthusiasm. Markets also face event risks from central bank policy shifts and geopolitical tensions.
However, absent any major negative surprises, sentiment looks set to remain upbeat – at least in the near-term. With valuations much lower after 2022’s rout, investors are positioning for global growth to pick back up as pandemic drags fade.
Upcoming economic data and guidance from more S&P 500 companies over the next several weeks should provide further evidence on the demand environment. But for now, improved risk appetite and bullish tech guidance has Asian markets off to a strong start to begin 2024.
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