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Analysts explained that the firm doesn’t believe the surge in demand for AI systems will have a meaningful effect on foundry/logic and memory utilization rates or catalyze higher WFE spending in the near term.
“We believe incremental wafer demand at TSMC from NVIDIA‘s demand upside amounts to only a few thousand incremental wafer starts per month over the next year (~10% of the output of a single 5nm fab at TSMC or ~2.5% of TSMC’s total 5nm capacity),” the analysts wrote.
“Additionally, as hyperscale budgets are likely constrained in the near-term due to the challenging macroeconomic environment, we believe AI servers will cannibalize compute servers.”
Later in the note, they stated that with only ~10% or less upside over the next 12 months, they do not believe there is enough reward to justify buying these stocks given the risks that include P/E multiples contracting over the next 1-2 years from near peak levels, WFE not reaching the firm’s forecast of $110bn by 2026, and the companies failing to reach their target operating models by 2026.
