Strategist Says TSMC's Blowout Q2 Validates AI Demand, Dismisses Valuation Worries Around MU, SNDK And Other Chip Stocks

• Mitrione added that as long as the earnings growth is there, the higher valuations of semiconductor companies are not really a problem for her.
• However, she said that she will continue to keep a watch on these valuations.
• The strategist added that she does not expect interest rates to rise much, as inflation is now easing due to lower crude oil prices.

Callan Family Office Market Strategist RaeAnn Mitrione on Thursday said that Taiwan Semiconductor Manufacturing Co.’s (TSM) blowout second-quarter (Q2) performance shows that the AI demand is indeed there.

Mitrione also dismissed concerns about the impact of the Iran conflict on the markets over the longer term, saying that its impact is now largely on a day-to-day basis.

“What we think will really drive the market over the long term are the fundamentals and that’s what we’re seeing in the earnings, and that’s what we’re seeing with Taiwan Semiconductor,” she said.

Taiwan Semiconductor shares were down more than 4% in Thursday’s pre-market trade. TSM was among the top trending tickers on Stocktwits at the time of writing.

Mitrione Downplays Chip Stock Valuation Concerns

Mitrione also downplayed concerns around the high valuations of semiconductor stocks following TSMC and ASML Holding NV (ASML), saying that the earnings are there to support these valuations.

“I mean the stock prices have moved up so much, the expectations are very high with these companies, but they’re printing the earnings to support it. As long as we have that, we’re comfortable with it,” she said.

Mitrione added that as long as the earnings growth is there, the higher valuations are not really a problem for her. However, she said that she will continue to keep a watch on these valuations.

“We do think that the broader AI movement is going to support and broaden out into other areas as well,” she added.

Jim Cramer said in a post on X the market largely shrugged off TSMC's blockbuster quarterly results, arguing that the semiconductor sector has become driven more by investor emotion than fundamentals, following SK Hynix Inc.’s (SKHY) U.S. listing.

TSMC Beats Wall Street Expectations, Pledges To Invest Another $100B In US

Mitrione’s comments come after TSMC’s Q2 performance that exceeded Wall Street expectations.

TSMC reported NT$1.27 trillion ($39.44 billion) revenue during Q2, beating Wall Street estimates of NT$1.26 trillion, according to Fiscal.ai data. Adjusted earnings per share (EPS) came in at NT$27.25, beating an estimated NT$24.29.

TSMC also pledged to invest an additional $100 billion to expand production in the U.S.

“This is to build several more semiconductor logical wafer fab for 2 nm and below technologies, as well as advanced packaging fabs to support the strong multi-year demand from our leading U.S. customers,” CEO CC Wei said during the post-earnings call.

Mitrione Doesn’t Expect Interest Rates To Move Up Too Much

The strategist added that she does not expect interest rates to rise much, as inflation is now easing due to lower crude oil prices.

“Largely, it seems like ‘higher for longer’ is getting priced in and not as much of a concern for markets,” she said, while adding that the Fed may not have to hike interest rates as much as previously expected.

Mitrione said she sees opportunities in the small-cap and emerging-market segments as the AI trade continues to broaden.

AAPL stock is up 21% year-to-date and 57% over the past 12 months. The S&P 500 ETF Trust (SPY) is up 21% over the past 12 months, while the Invesco QQQ Trust (QQQ) is up 28%.

The Vanguard Total Stock Market Index Fund ETF (VTI) is up 21% during this period, while the Vanguard Growth Index Fund ETF (VUG) is up 18%.

Also See: Apple Goes Shopping For AI Chip Startups Amid Struggles With Performance Of In-House Server Chips: Report

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