Electric car maker Tesla (NASDAQ:TSLA) pulled off quite a coup recently. It turned to chipmaker Taiwan Semiconductor (NYSE:TSM) over even Samsung to produce a line of chips. This big new step all around had an unexpected effect: both company shares were down—and pretty hard—in Thursday afternoon’s trading.
This was in spite of the fact that the Tesla order was huge, and Taiwan Semiconductor could certainly use such a substantial order. Reports suggest that the order Tesla placed was sufficiently large to make Tesla a major new customer, possibly even among the largest. The chip is a custom-designed model created by Tesla under the leadership of Jim Keller.
It offers self-driving capability in consumer vehicles without having to add a lot of additional hardware. The chip was designed over three years until finally being revealed in 2019. It represented several improvements over anything seen before, offering not only substantial improvement in use but also a minimal increase in power consumption. The next version of the chip is already in development and should be three times better than the current one.
While it’s odd to see both firms down on the strength of this news, both are still relatively attractive. Tesla remains a Moderate Buy despite its recent troubles. Taiwan Semiconductor, however, is a Strong Buy. Thanks to Tesla’s average price target of $275.19, it currently enjoys an upside potential of 118.7%. Meanwhile, Taiwan Semiconductor has 39.92% upside potential, thanks to its average price target of $104.
