AI Stocks Surge: Broadcom, TSMC, Nvidia, AMD, and Super Micro Computer in the Spotlight

Why Artificial Intelligence (AI) Stocks Broadcom, TSMC, and Arm Holdings Were Moving Higher Today | The Motley Fool

Artificial intelligence (AI) stocks were soaring today in response to the Federal Reserve's decision yesterday to cut the benchmark interest rates by 50 basis points. The federal funds rate is now 4.75%-5%, and the central bank signaled that it would cut rates twice more, by 25 basis points each time, before the end of the year. While stocks were volatile after the announcement yesterday, investors gave the news a full-throated cheer this morning, with major stock market indexes up sharply. The S&P 500 was up 1.5% and the Nasdaq up 2.3% as of 10:09 a.m. ET. Growth stocks and those dependent on capital investment like AI stocks did especially well. Semiconductors and AI stocks are a sensitive, cyclical sector in any kind of market environment, but that's especially true in the current one, as there's a lot of uncertainty around the strength of the economy, the durability of AI investment, and valuations in the sector. However, falling interest rates help assuage concerns on all of those fronts, especially since the central bank surprised some investors by cutting rates by 50 basis points instead of 25 bps, showing they want to stay ahead of the curve this time. Broadcom is a diversified tech company with exposure to cybersecurity, virtualization software, custom semiconductors, Ethernet switches and networking chips, and AI. The company expects to generate $12 billion in AI revenue this year. Broadcom is known as a prolific acquirer of businesses, buying VMware late last year, and lower rates will make it easier for the company to finance future acquisitions. Lower rates could also reduce Broadcom's interest rate or help it refinance its debt, as the company now has $66.8 billion. Additionally, Broadcom's customers will benefit from lower borrowing costs, making them more willing to invest in chips and other tech infrastructure. Taiwan Semiconductor may be the biggest linchpin in the tech industry. It's the world's biggest contract manufacturer of semiconductors, handling production for companies like Apple, Nvidia, Broadcom, and AMD. It's a cyclical business, and lowered interest rates are likely to support spending and demand for its major companies, especially Apple, which makes up about 25% of its revenue, as the iPhone maker is sensitive to consumer spending and demand. TSMC is also in the process of building massive foundries around the world, and it will need billions of dollars to do so. Lower borrowing costs, at least in the U.S., will make it easier for it to do that. Finally, Arm Holdings is in a similar position to TSMC as a key supplier for partners like Apple and Nvidia. Arm isn't a manufacturer, however. It licenses its chip designs like CPU architecture to companies like Apple. In fact, the iPhone is estimated to account for roughly half of its royalty revenue currently, so a boost for spending on iPhones is a win for Arm. Notably, Apple stock was up around 4% this morning. Similarly, the company also has increasing exposure to AI technologies in data centers and elsewhere, and lower rates should help increase investments in those areas, including in Arm technology, benefiting the company. With interest rates expected to come down further this year and into next, that should provide a tailwind for these three stocks and help tamp down concerns about a recession, which should further boost the AI sector. While there are valid concerns about valuations and the strength of end-user demand for new AI technologies like ChatGPT, the cloud infrastructure giants have signaled their eagerness to keep spending on AI infrastructure, which should support the growth of Broadcom, TSMC, and Arm. With monetary policy now loosening, AI stocks look poised for another step higher.

What's Going On With AI Related Stocks Nvidia, AMD, Broadcom And Super Micro On Thursday? - NVIDIA (NASDAQ:NVDA), Advanced Micro Devices (NASDAQ:AMD)

AI-focused semiconductor companies benefit from Fed's rate cut, easing pressure amid heavy investments and U.S. sanctions on China. Semiconductor stocks especially the ones linked to artificial intelligence technology led by Nvidia Corp NVDA, Broadcom Inc AVGO, Advanced Micro Devices, Inc AMD, Arm Holdings plc ARM, Super Micro Computer, Inc SMCI picked up after the U.S. Federal Reserve cut benchmark interest rate to spur growth. The U.S. Federal Reserve decided to cut its benchmark interest rate by 50 basis points in a first since 2020, setting the interest rate at 4.75% and 5%. The cut is expected to boost discretionary spending by the companies. The rate cut will be a welcome move, as semiconductor companies have invested heavily in Big Tech (including Microsoft Corp MSFT, Amazon.Com Inc AMZN, and Google parent Alphabet Inc GOOG GOOGL) spending on their artificial intelligence ambitions, which entail substantial capital expenditures. Also Read: Super Micro Poised for Expansion as Gross Margin Concerns Ease, Internal Control Risks Priced In: Analyst The semiconductor companies are also under pressure due to the U.S. sanctions on China, a crucial market. Therefore, U.S. investors and the semiconductor chiefs closely watch the agenda of the next President, expecting a softer stance on China. As per a CNBC survey, Republican candidate Donald Trump appeared to be an investor favorite as the S&P 500 and Nasdaq noted significant upside during Trump's tenure as President. However, the current Biden administration has started doling out semiconductor grants to the companies to consolidate its position. Contract chipmaker Taiwan Semiconductor Manufacturing Co TSM, a crucial AI chip supplier for U.S. semiconductor companies, remains hugely invested in its Arizona fab construction to produce AI chips after bagging U.S. chip subsidies. It recently secured two smartphone chip deals from Google and Apple. Price Actions: NVDA stock is up 3.16% at $116.95 premarket at last check Thursday. AMD is up 3.74% at $153.84, AVGO is up 3.45% at $167.25, SMCI is up 3.00% at $450.00, TSM is up 2.80% at $171.97, INTC is up 2.31% at $21.25, ARM is up 3.78% at $143.59. Photo via Shutterstock Market News and Data brought to you by Benzinga APIs