Considering Microsoft Corp (MSFT) Ahead Of Earnings Report? Here’s A Higher Alternative

Considering Microsoft Corp (MSFT) Ahead Of Earnings Report? Here’s A Higher Alternative

Microsoft Corp (NASDAQ:MSFT) CEO Satya Nadella has made the Redmond software giant the most important beneficiary of the AI revolution because of his vision and strategy. In 2019, when Microsoft invested $1 billion in OpenAI, the corporate behind ChatGPT, hardly anyone noticed. But when ChatGPT was launched and the floodgates of generative AI innovation opened, Microsoft was seen because the leader within the AI arms race. Microsoft’s investments in OpenAI have now swelled to $13 billion. The corporate’s long list of AI catalysts includes the revival of Bing Search, AI assistant Co-pilot, and AI PCs, amongst many others.

Is MSFT Overvalued?

Nevertheless, some consider the stock has run an excessive amount of and wishes a breather amid Wall Street’s growing concerns that only a handful of corporations now account for a lot of the market gains. Morgan Stanley’s Lisa Shalett recently said in a note that the Magnificent Seven group of stocks, including MSFT, is poised to see “radical deceleration” in earnings growth, in accordance with a report by Searching for Alpha. Goldman Sachs equity strategist David Kostin calculates that Microsoft’s sales growth within the second quarter will are available in at 15%, down from 17% within the previous quarter, as per one other report by Searching for Alpha. The corporate is anticipated to report earnings on July 23. As the corporate gets an excessive amount of highlight and AI expectations from the stock are too high, any decline in growth within the upcoming earnings could cause the stock to fall.

There are all the time undervalued players out there for many who know where to look. Let’s discuss an AI underdog that analysts consider has more upside based on its strong growth catalysts.

Trending: If there was a latest fund backed by Jeff Bezos offering a 7-9% goal yield with monthly dividends would you put money into it?

Taiwan Semiconductor: A Higher AI Stock Than MSFT?

Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) is one in every of the world’s most vital and largest semiconductor corporations. Tweaktown reports that the corporate’s long list of consumers includes tech giants like Apple, Nvidia, Qualcomm, AMD, and Broadcom, amongst many others. The AI revolution is anticipated further to bolster Taiwan Semiconductor’s demand and market share. In accordance with Tweaktown’s report, the corporate has a whopping 70% to 80% share of the 5nm semiconductor market and a 90% share of the 3nm chips market. Data from consultancy firm TrendForce shows that Taiwan Semiconductor had a 60% share of the worldwide foundry market as of 2021.

Taiwan Semiconductor’s AI Revenue Growth Projections

Taiwan Semiconductor’s chips are utilized in every little thing from smartphones to electric automotive sensors and PCs. Nevertheless, the large demand for high-end chips unlocked by the generative AI boom has made TSM a promising AI stock. During a primary quarter earnings call, Taiwan Semiconductor’s management said it expects revenue contribution from AI processors to double this yr and account for low-teens percent of total revenue. Revenue from AI is anticipated to grow at a 50% CAGR over the following five years and account for over 20% of the corporate’s total revenue by 2028.

Taiwan Semiconductor’s Moat within the Industry

Taiwan Semiconductor’s moat within the AI chips industry is powerful and wide. Firstly, the high-end chip manufacturing industry is not easy to enter, even for major corporations. Blackridge Research and Consulting firm reports that establishing a single 3nm fab could cost as much as $20 billion. On top of that, Taiwan Semiconductor’s real strength lies in churning tens of millions of chips with almost no defects — the corporate’s yield is over 95%, in accordance with the Atlantic Council. Only Samsung is anticipated to come back near Taiwan Semiconductor’s quality and manufacturing capability in the approaching years amid its huge investments and plans to foray into the fab industry. Apart from Taiwan Semiconductor, it has no formidable competitors.

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Is the China Threat Overblown?

Despite its dominance within the AI chips industry, Taiwan Semiconductor’s share price growth has been capped, and its valuation still looks attractive in comparison with its peers. The stock’s forward P/E is 27.7 (47 for Nvidia and 46 for AMD). The largest concern around TSM is a possible Chinese escalation against Taiwan because the company’s major manufacturing operations are based in Taiwan. Nevertheless, many analysts consider these concerns are overblown and the corporate has no short-term risks. They are saying China cannot afford to go right into a direct conflict with the US. In accordance with a report by the Hudson Institute, any disruption in Taiwan’s semiconductor industry could end in a $1.6 trillion economic loss to the US. Taiwan Semiconductor’s chip industry dominance is seen as a ‘Silicon Shield’ for Taiwan, which the country can use to discourage attacks. Earlier this month, Taiwan Semiconductor’s Chairman and CEO C.C. Wei said that it’s “unimaginable” to maneuver chip manufacturing outside of Taiwan and that 80% to 90% of chip manufacturing stays within the country.

Wall Street Thinks AI Boom Will Profit Taiwan Semiconductor

Wall Street can also be growing bullish on the corporate. Recently, Bernstein analyst Mark Li said that high-end phones and advanced nodes could end in Taiwan Semiconductor topping its 2024 guidance. The analyst thinks the corporate’s data center revenue is growing as expected. Li increased his price goal for TSM to $200 from $150. He expects Taiwan Semiconductor’s revenue to extend by 25% and EPS by 28% in 2024. Earlier this month, BofA’s Brad Lin also increased his price goal for TSM to $180. Lin thinks latest AI plans revealed by Apple and other corporations on the Computex 2024 event would drive the on-device AI trend, benefiting TSMC, which the analyst called the “key enabler” of AI prosperity.

There Are Higher High-Yield Opportunities

The present high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through dividend stocks… Certain private market real estate investments are giving retail investors the chance to capitalize on these high-yield opportunities and Benzinga has identified a number of the most tasty options for you to contemplate.

As an example, Basecamp Alpine Notes offers a goal APY of 9% with a term of only three months, making it a robust short-term money management tool with incredible flexibility. EquityMultiple has issued 61 Alpine Notes Series and has met all payment and funding obligations with no missed or late interest payments. With a low minimum investment of just $1,000, Basecamp Alpine Notes makes it easier than ever to begin constructing a high-yield portfolio. 

Don’t miss out on this chance to reap the benefits of high-yield investments while rates are high. Try Benzinga’s favorite high-yield offerings.

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