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What TSM's Earnings Told Us About Nvidia's (NVDA) Next-Gen Graphics Cards

Afrasiab Mian
Taiwan Semiconductor (TSM) reported earnings of $0.47 per share on $7.85 billion in revenues Thursday morning. But the report told us about more than just TSM, so let's take a look at what else was inside.

Taiwan Semiconductor TSM reported earnings of $0.47 per share on $7.85 billion in revenues Thursday morning. The EPS metric beat our Zacks Consensus Estimate by two cents and rose 9.1% year-over-year, while revenues fell in line with expectations and grew 11.2%.

TSM was affected by mobile product seasonality but saw continued strength in cryptocurrency miner demand, which is interesting considering cryptos such as bitcoin have been in a significant slump since March.

Guidance for Q3 was also raised significantly from $7.8-$7.9 billion to $8.45-$8.55 billion. Investors should note that this falls below our current $9.1 billion estimate, but that firms also generally tend to take a conservative approach to issuing guidance. “Moving into third quarter 2018, we anticipate our business will benefit from new product launches using TSMC 7-nanometer technology while cryptocurrency mining demand will decrease from second quarter,” senior executive Lora Ho commented in the company’s earnings release.

TSM’s strong report gives us a pretty solid overview of the semiconductor industry because it is the largest contract chipmaker in the world. It also gives us some clues about upcoming news from some other big players in the industry.

Big News Next Month from Nvidia?

TSM’s projected boost in performance comes from a large increase in orders for smartphone chips, according to industry sources via DigiTimes. The sources also highlighted shipments of Nvidia’s NVDA new line of GeForce GTX Series 11 GPUs as a catalyst for the firm. Rumors have swirled around the long-awaited “Turing” series for some time now, as two years have passed since the Pascal-based Series 10 first launched.

Prices for current graphics cards have been slowly decreasing to MSRP levels, leading many consumers to believe that either Nvidia is still sitting on a large pile of the cards, or that the new lineup is coming soon. It is very possible that both theories hold some weight.

The company is slated to speak at Hot Chips, one of the largest conferences in the semiconductor industry, on August 20th. It is widely believed that Nvidia will announce its new line of cards during the event, rumors which that were supplemented by a Lenovo product manager who freely spoke about the GTX 11 Series on camera during E3.

Outlook

The explosive semiconductor industry is constantly on the move. While there is no guarantee that any one rumor holds more credence than another, the increasing number of similar reports are a sign that something big is potentially on the horizon.

Investors should keep an eye out for an official Nvidia announcement, which could come in late-August, or even as soon as the end of July.

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