Core Viewpoint - Morgan Stanley maintains an "Overweight" rating on TSMC (TSM.US) with a target price of NT$1,275, citing significant increases in CoWoS capacity projections for 2026 and 2027 [1] Group 1: TSMC Capacity Expansion - TSMC's CoWoS capacity is expected to reach 95,000 wafers per month by the end of 2026 and further increase to 112,000 wafers per month by the end of 2027, which is a notable upgrade from previous forecasts [1] - The expansion is primarily driven by the planned capacity construction of the AP8 factory, expected to commence production in mid-2026, alongside sustained demand from key clients such as NVIDIA, Broadcom, and AMD [1] - From the second half of 2026, full-stack CoWoS packaging orders for non-AI products will begin to shift to OSAT partners, mainly ASE, allowing TSMC to focus more on the CoW (Chip-on-Wafer) segment [1] Group 2: Client Demand Insights - Broadcom is projected to have a CoWoS allocation of 185,000 wafers in 2026, representing a 93% year-over-year increase, driven mainly by demand from Google's TPU project [2] - Morgan Stanley estimates that TPU shipments will reach 2.5 million units in 2026, a 38% increase year-over-year, with additional contributions from Meta's first CoWoS-based ASIC (Athena) and OpenAI's ASIC projects [2] - NVIDIA's demand is expected to remain robust in the first half of 2026 due to increased chip sizes and strong B300 demand, with an estimated production of 2.9 million Rubin GPUs [3] Group 3: AMD's Growth Dynamics - AMD's CoWoS demand is expected to remain stable in 2025 but will grow in 2026 with the ramp-up of MI400/MI450 series and Venice CPU, which utilize HBM and CoWoS-S packaging [4] - The adoption rate of MI400/450 (using CoWoS-L) will be a key variable for AMD's growth trajectory, while the company plans to expand 2.5D/wafers-level fan-out packaging applications in gaming GPUs and high-end server/PC CPUs in 2026/27 [4]

Summary of TSMC's CoWoS and Advanced Packaging Outlook Company and Industry Overview - **Company**: Taiwan Semiconductor Manufacturing Company (TSMC) - **Industry**: Semiconductor, specifically focusing on advanced packaging technologies such as CoWoS (Chip on Wafer on Substrate) and CoPoS (Chip-in-Panel-on-Substrate) Key Points and Arguments CoWoS Capacity and Growth Forecast - TSMC's total CoWoS capacity is projected to reach **675k** wafers per month (wpm) by the end of **2025**, with a forecast of **1.08 million** wpm by the end of **2026**, representing a **61%** year-over-year (YoY) growth [5][62] - The company anticipates further expansion to **130k** wpm by the end of **2027** [5][13] - CoWoS capacity has seen significant growth, with a **100%** YoY increase noted in early **2024** [11] Utilization Rate and Production Adjustments - TSMC's CoWoS utilization rate (UTR) is expected to be in the low **90s** in **1H26**, with a return to full capacity anticipated in **2H26** as new projects enter mass production [5][57] - Adjustments in nVidia's orders have led to a production mismatch, impacting the UTR and causing some expansion timelines to shift [5][50] Customer Allocation and Market Dynamics - nVidia is projected to maintain a **50.1%** market share in CoWoS capacity allocation for **2026**, slightly down from **51.4%** in **2025** [6][62] - Broadcom is expected to become the second-largest customer, with an allocation of **187k** wpm, benefiting from multiple projects entering mass production [62] Advanced Packaging Technologies - TSMC is focusing on several advanced packaging technologies, including CoWoS, CoPoS, and WMCM (Wafer-level Multiple-Chip Module), with CoPoS expected to enter high-volume production by **2028** [5][21][35] - CoWoS has evolved from a niche solution to a critical component in AI and high-performance computing (HPC), driven by the demand for larger memory bandwidth [10] Strategic Partnerships and Outsourcing - TSMC is collaborating with OSAT partners like ASE and SPIL to manage the increasing demand for CoWoS, with expectations that outsourcing will accelerate in **2026** and **2027** [40][42] - The company has invested significantly in expanding its advanced packaging capabilities, including a **US$100 billion** investment in the U.S. for new fabs and R&D centers [46] Challenges and Future Outlook - The semiconductor industry faces challenges such as production bottlenecks and mismatches between upstream and downstream production, which TSMC is actively addressing [52] - The demand for AI-related products is expected to remain strong, with TSMC's management indicating improved demand compared to previous forecasts [52] Conclusion - TSMC is positioned as a leader in the advanced packaging sector, with aggressive expansion plans and a strong customer base, particularly in the AI and HPC markets. The company's strategic partnerships and investments are expected to support its growth trajectory in the coming years [7][46]

Core Viewpoint - AMD is on a promising trajectory to reach a $1 trillion market cap, driven by its advancements in the semiconductor industry and the growing demand for AI accelerators [1][12]. Current Position of AMD - AMD currently has a market cap of $280 billion, which is 28% of the $1 trillion goal, indicating that it needs to double in value less than two times to reach this milestone [3]. - The company has a price-to-earnings (P/E) ratio of 99, but a forward P/E ratio of 44, suggesting potential for multiple expansion similar to other high-growth stocks [4]. Business Growth Potential - AMD's data center segment, which focuses on AI accelerators, generated over $6.9 billion in revenue in the first half of 2025, accounting for approximately 46% of total revenue [5]. - The AI accelerator market is projected to grow at a compound annual growth rate (CAGR) of 29% through 2030, potentially benefiting AMD significantly [8]. - The semiconductor industry is also expected to grow at a CAGR of 15% through 2032, providing additional tailwinds for AMD [9]. Competitive Landscape - Although AMD is currently behind Nvidia in the AI accelerator market, the upcoming release of the MI400 chip could position AMD as a competitive threat to Nvidia's offerings [6][7]. - Nvidia's current market cap is just under $4.5 trillion, meaning AMD would need to grow to about one-fourth of Nvidia's size to reach a $1 trillion market cap [10]. Future Outlook - AMD is expected to benefit from various catalysts that could propel its market cap to $1 trillion and beyond, with a strong emphasis on the AI accelerator market [12][13]. - The growth of all four segments—data center, client, embedded, and gaming—will likely contribute to AMD's overall growth trajectory [12][13].

Core Viewpoint - AMD has agreed to pay 15% of its chip sales revenue from China to the U.S. government, but Citigroup believes this will have a minimal impact on AMD's profitability, maintaining a "neutral" rating with a target price of $180 [1] Group 1: Financial Impact - The 15% revenue payment is a condition for semiconductor export licenses approved by the Trump administration, but its effect on AMD's earnings is considered minor [1] - The agreement primarily affects low-margin products like the MI308X, which has a profit margin significantly lower than AMD's average company profit margin of nearly 54% [1] Group 2: Growth Drivers - The main growth drivers for AMD are its mainstream AI GPUs, the MI355 and MI400, which are expected to boost AI sales to $6.2 billion in 2025 (a 23% increase) and $9.9 billion in 2026 (a 58% increase) [1] - Key customers driving this growth include Amazon, Oracle, Meta Platforms, and OpenAI [1]

Core Viewpoint - AMD has agreed to share 15% of its AI GPU sales in China with the U.S. government in exchange for export licenses, which has raised concerns, but analysts believe the impact on AMD's profitability will be minimal [1] Group 1: Financial Impact - Citigroup analyst Christopher Danely maintains a "neutral" rating on AMD with a target price of $180, noting that the stock's valuation is slightly above its historical average [1] - The agreement primarily affects low-margin products like the MI308X, which has a profit margin significantly lower than AMD's average margin of nearly 54% [1] Group 2: Growth Projections - AMD's mainstream AI GPUs, specifically the MI355 and MI400, are expected to drive significant growth, with AI sales projected to reach $6.2 billion in 2025 (a 23% increase) and $9.9 billion in 2026 (a 58% increase) [1] - Key customers contributing to this growth include Amazon, Oracle, Meta, and OpenAI [1] Group 3: Competitive Landscape - Competitor NVIDIA has also signed a similar export agreement with China [1] - Wall Street currently rates AMD as "moderate buy," with analysts estimating an average upside of about 5% from current levels [1]

Group 1 - AMD's Q2 performance exceeded expectations with revenue of $7.7 billion, a 32% year-over-year increase, surpassing the consensus estimate of $7.43 billion [3][4] - The growth was driven by strong sales of processors, particularly the new generation CPUs based on the Zen architecture, which saw a 67% increase in client business revenue [3] - However, the data center business showed signs of weakness, with only a 14% year-over-year growth and a 12% quarter-over-quarter decline, marking the first consecutive quarterly contraction since Q3 2023 [4][9] Group 2 - AMD's gross margin remained stable at 54%, but the pricing strategy to compete in the AI chip market has weakened its pricing power, leading to concerns about long-term profitability [6][13] - The overall market for PCs and gaming graphics cards is expected to grow only modestly, limiting AMD's ability to support its current valuation of over $260 billion [7][9] - AMD's market position is challenged by competitors like NVIDIA and emerging ASIC companies, which have advantages in AI applications and market share [12][13] Group 3 - The company is accelerating the development of its next-generation AI computing chip, MI400, which aims to significantly enhance performance in AI applications [10][11] - Despite these efforts, AMD's ecosystem still lags behind NVIDIA's CUDA, making it difficult to attract developers and gain market share in the AI sector [11][13] - The current high P/E ratio of around 90 implies market expectations for a compound annual growth rate of over 50% in net profit over the next three years, a challenging target given the current market conditions [14][15]

Summary of Advanced Micro Devices (AMD) Earnings Call Company Overview - **Company**: Advanced Micro Devices (AMD) - **Industry**: Semiconductors - **Market Cap**: $285.351 billion - **Current Stock Price**: $174.31 - **Price Target**: $168.00 - **Fiscal Year Ending**: December 2024 Key Financial Highlights - **Q2 Revenue**: $7.685 billion, up 3.3% quarter-over-quarter (q/q) and 31.7% year-over-year (y/y) [15] - **Data Center Revenue**: $3.240 billion, down 11.8% q/q but up 14.3% y/y [15] - **Client Revenue**: $2.499 billion, up 8.9% q/q and 67.5% y/y [15] - **Gaming Revenue**: $1.122 billion, up 73.4% q/q and 73.1% y/y [15] - **Embedded Revenue**: $0.824 billion, up 0.1% q/q but down 4.3% y/y [15] - **Gross Margin**: 43.2%, in line with expectations [15] - **EPS**: $0.48, matching consensus estimates [15] Guidance and Outlook - **Q3 Revenue Guidance**: $8.7 billion at the midpoint, implying a 13.2% sequential increase, above consensus estimates [16] - **Gross Margin Guidance for Q3**: 54.0%, up 1080 basis points q/q [16] - **Full Year 2025 Revenue Forecast**: $33.419 billion, up from $32.413 billion [18] - **2026 Revenue Forecast**: $40.044 billion, reflecting 20% top-line growth [18] Core Insights and Concerns - **Strength in Segments**: The quarter was strong across all segments, but the reliance on console gaming for revenue growth is seen as a lower quality portion of AMD's business [3] - **AI and MI400 Series**: The MI400 series is viewed as a key driver for future growth, with expectations of generating "tens of billions" in AI revenue [11][12] - **China Market Uncertainty**: AMD did not include potential MI308 sales to China in their guidance due to uncertainties in the licensing process, reflecting a more conservative outlook on the Chinese market [4][10] - **Operating Expenses**: Higher operating expenses limited the impact on EPS, which is a concern for future profitability [3][9] Competitive Landscape - **Market Position**: AMD is gaining market share in the PC and server markets, particularly benefiting from Intel's struggles [14][37] - **AI Competition**: Despite AMD's strong position, there are concerns about competition from Nvidia and the need for tangible enthusiasm from customers regarding AMD's long-term roadmap [20][19] Risks and Considerations - **High Expectations for AI**: The current high expectations for AMD's AI capabilities leave limited room for upside, making it difficult to maintain a premium valuation [19][22] - **Potential for Downside**: If AMD fails to capitalize on AI opportunities or if Intel regains footing, there could be significant downside risks [30][19] Conclusion - **Investment Thesis**: The stock is rated as Equal-weight due to a combination of strong segment performance and concerns about future growth, particularly in AI and the Chinese market. The price target has been adjusted to $168, reflecting a more cautious outlook [9][21]

Core Viewpoint - Advanced Micro Devices (AMD) reported Q2 results that were below expectations, leading to a sell-off in the stock, but this also presents a potential buying opportunity as the company remains strong in various segments and is expected to rebound [1][10]. Financial Performance - AMD's Q2 revenue grew by 31.7% to a record $7.69 billion, driven by strong performance across all segments, particularly in AI, data center, and GPU sectors [4][5]. - The datacenter segment grew by 14%, while client and gaming segments surged by 69%, although the embedded segment saw a contraction of 4% [5]. - Despite the revenue growth, margins and earnings declined, primarily due to restrictions on semiconductor sales to China, impacting overall profitability [2][6]. Future Outlook - The guidance for Q3 indicates a revenue growth forecast of 28% year-over-year, with expectations for adjusted gross margins to return to normalized levels [6]. - AMD's current outlook does not include revenue from shipments to China, as license applications are still under review [7]. Asset and Cash Flow Management - AMD's free cash flow reached record levels, supporting a healthy balance sheet and ongoing investments in future growth [7]. - Total assets increased by 8% or $5.6 billion, with asset gains outpacing liability increases, maintaining low leverage [8]. Valuation and Market Position - AMD trades at a high valuation of 45x the current year estimate but only 14x the 2030 outlook, suggesting potential for significant price appreciation over the next five years [9]. - The stock has a 12-month price forecast of $173.52, indicating a 6.75% upside from the current price, with a bullish initial analyst response [11][12].

Financial Performance & Growth - AMD achieved 32% year-over-year growth in the second quarter [3] - The company is guiding for a very strong second half of the year [3] - AMD anticipates 28% year-on-year growth for the coming quarter and 13% sequentially [5] AI Business & Market Opportunity - AMD sees a clear path to scaling its AI business to tens of billions of dollars in annual revenue [5] - The company believes the AI market will be a $500 billion+ market over the next few years [8] - AMD is on an annual cadence of new AI products, highlighting the rapid pace of innovation in AI [10] Data Center Business - AMD's data center business is performing extremely well and is a main driver of growth [12][13] - The company expects double-digit sequential growth in its data center business [14] - AMD sees an inflection point in data center revenue as it enters the third quarter [13] China Market & Licensing - Licenses for AI chip proliferation in China are in process and under review with the US administration [5] - AMD did not forecast China revenue in the third quarter due to the licenses being in process [5] Product Portfolio - AMD launched its MI350 series, which it considers very competitive [10] - The company is developing the MI400 series, expected to be very competitive in 2026 [10]

Core Viewpoint - AMD's second-quarter earnings fell short of expectations, leading to a nearly 5% drop in pre-market trading, despite a year-over-year revenue increase of 32% to $7.7 billion, surpassing analyst expectations of $7.43 billion [1] Financial Performance - AMD reported second-quarter revenue of $7.685 billion, a 32% year-over-year increase and a 3% quarter-over-quarter increase, exceeding market expectations by $270 million [2] - Adjusted earnings per share were $0.48, slightly below the Wall Street expectation of $0.49 [1] - The data center business revenue grew 14% to $3.2 billion, slightly below the market expectation of $3.25 billion [1] Analyst Ratings and Price Targets - Benchmark reiterated a "Buy" rating for AMD, raising the target price from $170 to $210, citing strong second-quarter results and encouraging third-quarter guidance of $8.7 billion in revenue, which is a 28% year-over-year increase [2] - KeyBanc maintained a "Hold" rating, noting strong revenue driven by server and gaming businesses, with expectations of double-digit growth in server CPUs [3] - Oppenheimer kept a "Market Perform" rating, acknowledging AMD's performance and outlook but remaining cautious until a clearer path to sustained outperformance is established [3] - Mizuho raised its target price for AMD from $175 to $183 [4] Growth Drivers - AMD's revenue growth was attributed to increased market share in EPYC server CPUs and Ryzen client CPUs, tight supply of Radeon desktop GPUs, and rising shipments of semi-custom gaming consoles [2] - The third-quarter growth is expected to be driven by strong double-digit growth in the data center segment, particularly with the production ramp-up of MI350 [3]