The U.S. government has ordered chip giant Taiwan Semiconductor Manufacturing Co. (TSM) to stop supplying advanced AI (artificial intelligence) chips to China, effective today. The order pertains to TSMC’s 7-nanometer chips and smaller chips designed for use in China’s AI accelerator and GPUs (graphics processing units). TSMC has maintained that it is a law-abiding company and will comply with all domestic and international export controls.
The U.S. Commerce Department Tightens Export Controls
The U.S. Department of Commerce sent the order weeks after TSMC found that one of its chips was used in a Huawei processor. Huawei is a part of the department’s restricted trade list. The department’s communication or order, known as an “is informed” letter, allows the U.S. administration to bypass the writing of lengthy rules and instantly impose licensing requirements on companies.
Chip suppliers are required to take special licenses before exporting any tech or AI to companies like Huawei that feature on the restricted list. TSMC also stopped supplying chips to another Chinese chip designer Sophgo, after the company found that the chip matched the one found in Huawei.
The Commerce Department is determined to find out how the advanced chips are reaching Huawei, as it indicates a violation of export restrictions. Earlier, chipmakers like Nvidia (NVDA) and Advanced Micro Devices (AMD) received such orders from the Department, requiring them to stop supplying advanced tech to China. Such orders are part of the U.S. government’s efforts to prevent the Chinese military and other organizations from leveraging advanced tech to boost China’s warfare capabilities.
Insights from TipRanks’ Bulls Say, Bears Say Tool
TSMC has remained at the center of the AI revolution, given that it is one of the most advanced chipmakers. Despite the growing demand for advanced AI, TSMC has its own set of challenges since the export of its chips to one of the largest consumer markets remains under focus.
According to TipRanks’ Bulls Say, Bears Say tool, some analysts are optimistic about the AI demand and outlook and management’s enthusiasm for sustaining the company’s dominance in the tech space.
On the other hand, bears are concerned about the lackluster growth in the automotive sector, falling gross margin expectations, and slow recovery in the smartphone market.
Is TSM a Good Stock to Buy?
Despite the ongoing challenges, five analysts have given a unanimous Buy rating to TSM stock. This translates into a Strong Buy consensus rating on TipRanks. Also, the average Taiwan Semiconductor Manufacturing Co. price target of $205 implies 1.9% upside potential from current levels. Year-to-date, TSM shares have gained 95.1%.
