Last year wasn’t kind to the world’s largest contract chip maker. This year could shape up to be much better for Taiwan Semiconductor Manufacturing Co., or TSMC —and the chip industry in general.
A pervasive inventory glut throughout the semiconductor supply chain punished all chip makers in 2023, and TSMC was no exception. Revenue at the Taiwanese company fell 2% year on year in dollar terms last quarter, while net profit dropped 19%. That brought about a rare 9% decline in TSMC’s full-year revenue. Chip consumers like smartphone and computer makers have been slowly digesting inventories built up at the tail end of the pandemic-era electronics boom. But the outlook looks brighter now that destocking seems to finally be over. TSMC expects revenue in 2024 to grow more than 20% from last year. TSMC, which counts Apple, Nvidia and Qualcomm among its customers, is the bellwether for the industry. The stock ended up 1.2% on the Taiwan Stock Exchange while smartphone and electronics manufacturer Foxconn gained 8.1% on the Shanghai Stock Exchange. STMicroelectronics climbed 3.7% in Paris, while Soitec jumped 4.9%. Infineon gained 4.8% in Frankfurt and ASML advanced 4.1% in Amsterdam.

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The Swiss stock market ended trading on Thursday with slight gains. Sentiment was driven primarily by the strong performance of Richemont shares, jumping 10.4 per cent. Citi analysts were reassured by the fact that the company was able to increase sales in the third quarter by 8 per cent adjusted for exchange rate effects (consensus estimate: 7 per cent) in view of the recent volatile figures from the luxury segment and mixed macro news from China. Swatch shares rose by 1.0 per cent in the wake of these positive results. The SMI recorded a gain of 0.3 per cent to 11,186 points. Of the 20 SMI stocks, there were 11 losers and 9 gainers. A total of 18.79 (previously: 18.43) million shares were traded. Geberit shares fell by a further 0.8 per cent following the previous day's sales figures. The market was held back slightly by decreases among the index heavyweights Novartis, Nestle and Roche, slipping by up to 0.6 per cent.

Europe
The European stock markets recovered some ground on Thursday after starting the week on a downbeat note. The semiconductor and luxury goods sectors stood out, thanks to favourable figures published by Taiwan's TSMC and Switzerland's Richemont. The Stoxx Europe 600 index gained 0.6% to 470.5 points. In Paris, the CAC 40 and SBF 120 rose by 1.1% each. The DAX 40 in Frankfurt added 0.8%, while the FTSE 100 in London climbed 0.2%. Luxury goods stocks rose in the wake of Richemont (+10.4% in Zurich). LVMH gained 2.5%, Kering 2.2% and Hermès 1.8%. In Milan, Ferragamo increased by 2.2%, Tod's by 1.7% and Moncler by 0.8%. Veterinary laboratory Virbac (-1.5%) reported sales slightly higher than expected in the fourth quarter and confirmed its targets for 2024. Thales fell by 1.3% to €136.45. Exane BNP Paribas lowered its recommendation for the defence and technology group from "outperform" to "neutral", while raising its target price from €150 to €155. JPMorgan lowered its target price for Thales from €175 to €171, while confirming its "overweight" rating. Retirement home and clinic operator Orpea (-0.7% to €0.01) announced the launch of the third capital increase under its accelerated rescue plan. Orpea has also lowered its gross operating profit before rent (Ebitdar) forecast for 2023.

United States
Rising technology shares powered major indexes higher on Thursday. The S&P 500 rose 0.9%, while the Nasdaq Composite gained 1.3%. The Dow Jones Industrial Average advanced 0.5%, or 202 points, snapping a three-session losing streak. The information-technology sector was the broad index’s top performer, rising 2%. Chip stocks rallied after key supplier Taiwan Semiconductor gave a stronger outlook overnight than Wall Street had forecast. The PHLX Semiconductor Index rose 3.4%, led by companies like Qualcomm and Lam Research. Apple shares rose 3.3% to close at a 2024 high. Initial jobless claims were 187,000 last week, the Labor Department said Thursday, the lowest since September 2022. The KBW Nasdaq Bank Index traded lower for a seventh consecutive session, dropping 0.5%. Discover Financial Services lost 11% after earnings fell short of expectations. Health-insurance stocks sold off after Humana warned that rising medical costs could impact its financial results. Humana fell 8%, and rivals like CVS Health and Elevance Health also sold off. Spirit Airlines fell 7.2%. Spirit is weighing restructuring options after a federal judge blocked the low-cost carrier’s deal to be acquired by JetBlue Airways, The Wall Street Journal reported Thursday.

Asia
Asian stocks were mixed. In Tokyo, the Nikkei 225 index rose by 1.1 per cent to 35,874 points, and Seoul also recorded an increase of this magnitude. However, Shanghai (-0.7 per cent) and Hong Kong (-0.2 per cent) were the exceptions in East Asia, where the indices declined. In Seoul, Samsung Electronics rose by 3.5 per cent and, as a clear index heavyweight, also made a significant contribution to the rise of the Kospi (+0.9%). Shares of chip manufacturer SK Hynix climbed 2.8 per cent. In Tokyo, industry stocks Tokyo Electron and Renesas Electronics jumped by around 4 per cent.

Bonds
Ten- and 30-year U.S. Treasury yields finished at their highest levels of the year for a third straight session on Thursday after the release of lower-than-expected initial jobless claims. The 10-year Treasury note yield gained 4 basis points to 4.142% with the 2-year Treasury note yield stabilising at 4.342%.

Analysis
Price target Partners Group: UBS downgrades to CHF 1263 (1289) - Buy
Citi lowers Stadler target to CHF 27 (35) - Neutral
Price target Valiant: UBS upgrades to CHF 122 (121) - Buy

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