Susquehanna: AMD Production Shift To Taiwan Semiconductor Highlights Manufacturer's 'Domination'

Advanced Micro Devices, Inc. AMD announced Monday that it will move its entire 7nm-and-below CPUs and GPU production to Taiwan Semiconductor Co. Ltd. TSM.

The Analyst

Susquehanna analyst Mehdi Hosseini reiterated a Positive rating on Taiwan Semiconductor with a $48 price target.

The Thesis

The move undescores TSM's "domination" in the 7nm-and-less market, Hosseini said in a Tuesday note. (See his track record here.)

“Not only does incremental business from AMD help underpin a diversification of TSM's revenue mix beyond smartphones" and Apple Inc. AAPL, the analyst said, "it also underscores a significant win for TSM as it could potentially become a key enabler in AMD's strategy of winning server business." 

TSM is a leading-edge semiconductor manufacturer, and the company can now enable AMD and other future fabless companies in winning compute strategies with sever, edge and AI applications, Hosseini said. 

The products affected by AMD's announcement include the company’s initial products in its second-generation core and new GPU architecture. AMD has noted the products have shown "excellent results," the analyst said. 

GlobalFoundries is simultaneously “putting its 7nm program on hold indefinitely," providing additional business opportunity for TSM, Hosseini said. 

Price Action

TSM shares were up 2.18 percent at $42.44 at the time of publication Thursday, while AMD shares were down nearly 4 percent at $24.26. 

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