Taiwan Semiconductor and Cloudflare have been highlighted as Zacks Bull and Bear of the Day

For Immediate Release

Chicago, IL – July 9, 2025 – Zacks Equity Research shares Taiwan Semiconductor TSM as the Bull of the Day and Cloudflare NET as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Dollar General Corp. DG, Sprouts Farmers Market, Inc. SFM and Target Corp. TGT.

Here is a synopsis of all five stocks.

Bull of the Day:

Taiwan Semiconductor is the premier chip fabrication company for the world's most advanced digital technologies, from Apple smartphones to NVIDIA GPUs.

In less than five years, TSMC's trailing 12-month revenue has more than doubled to hit $95 billion as of the March quarter. Clearly, this is on the back of NVIDIA's explosive growth which saw sales grow by ten times in the same period to $148.5 billion as of the April quarter, on its way to nearly $200 billion this fiscal year (ends January).

Of course, demand for NVIDIA GPU systems didn't turn into a hockey stick until its "ChatGPT moment" in the spring of 2023.

I mark that moment in late May at Computex in Taipei City, Taiwan when Jensen Huang unveiled the DGX Grace Hopper 200 system and said that Microsoft, Google, and Meta Platforms were already in line.

To me, this meant that the other 996 corporations in the Fortune 1,000 would want (or need) to build their own LLMs too. I then published this article and video to explain what was coming...

Nvidia DGX: Workhorse of AI Will Drive NVDA to $2 Trillion

And that $2 trillion market cap came quickly. That's when the "AI bubble" talk started. You can imagine how astonished the bubble breathers are now that NVDA is approaching a $4 trillion market cap.

"Honey, I Shrunk the Chips!"

While Apple's business has been significant for TSMC (as much as 25% of revenues), the iPhone maker's sales growth has stalled in the low single digits.

What still makes Apple very important though is how they help drive innovation at TSMC by always demanding the latest and greatest architectures for their ecosystem of devices.

TSMC supplies chips for flagship smartphones and 5G infrastructure, where efficiency and miniaturization are crucial. The company’s 5nm and 3nm transistor nodes are widely adopted in high-end mobile devices and 5G equipment, supporting the global rollout of next-generation connectivity.

Transistor nodes refer to the specific manufacturing processes used to produce integrated circuits, where the "nm" (nanometer = 1 billionth of a meter) like 7nm or 5nm, historically represented a physical dimension of the transistor, specifically the gate length. For reference, the coronavirus is about 50nm.

Now it's more of a marketing term that signifies a new generation of chip technology with improved performance, power efficiency, and transistor density.

But generally, a smaller node number means...

Smaller transistors: More transistors can be packed into the same area on a chip.

Faster switching: Electrons have a shorter distance to travel, leading to higher clock speeds.

Lower power consumption: Less voltage is needed to operate the smaller transistors.

Why the AI Economy is Not a Bubble

Which brings us back to NVIDIA as they now pack 208 billion transistors into the Grace Blackwell "superchip" with further density on the horizon in the Rubin and Feynman series of GPUs expected in 2026 and 2027, following Jensen's nearly annual cadence of development.

I mentioned the early demand for NVIDIA systems in 2023 and have recently seen similar projections from Goldman Sachs, Bank of America, and Marvell at their Custom AI Investor Event that total datacenter capex by the big "hyperscalers" (Amazon, Microsoft, Google, Oracle) plus Meta, Tesla, OpenAI, Apple, and xAI, will grow from nearly $600 billion this year to over $1 trillion in 2028.

This demand is not slowing down because all these companies realize that the transition to an "AI economy" is built on the infrastructure of NVIDIA GPU systems. I am on record late last year saying that this megatrend would lead to over $500 billion in revenues for NVIDIA by 2030. That's only ~35% CAGR from when the TTM topline crossed $100 billion.

And that's the infrastructure to power not just generative and agentic AI systems (i.e., LLMs), but a whole new world of "physical AI" for autonomous machines, including self-driving cars, humanoid robots, and many other types of 3D automation requiring "embodied" or edge intelligence and vision/spatial perception.

And of course my favorite use cases for these technologies are science and medicine, where researchers can plumb the depths of our existence and come back with wondrous and life-changing knowledge.

The training alone for these worlds requires enormous datasets and compute, using simulation and synthetic models. In this way, Jensen is forging a new universe of possibilities that keep TSMC "fabs" humming.

TSMC is the Backbone of the AI Economy

TSMC holds about 67% of the global foundry market and nearly 90% of advanced chip production, making it the preferred manufacturer for high-performance, custom AI accelerators and GPUs.

While NVIDIA designs the magical GPUs and systems that power the innovations of the AI Economy, it all starts with Taiwan Semi's advanced silicon fabrication. This is the epitome of high-tech manufacturing using lithographic etching to create circuits smaller than the eye can see.

And what's better for crafting new chips than brand new "fabs" as TSMC just broke ground on their 3rd facility in Phoenix, Arizona. In late June, Softbank's Masayoshi Son announced new plans to invest in a $1 trillion industrial complex in Arizona that will build robots and AI technologies.

Son is seeking to create a version of China's vast manufacturing hub of Shenzhen, which concentrates high-tech companies for proximity of resources, logistics, R&D, collaboration, and talent. TSMC was named as a key partner in Son's plans.

Currently for TSMC, the 5nm and 3nm nodes are the backbone for state-of-the-art AI accelerators, powering chips from NVIDIA, AMD, and Apple that are used in generative AI, machine learning, and high-performance computing (HPC) workloads.

In Q1 2025, 58% of TSMC's wafer revenue came from 3nm and 5nm nodes, with 73% from 7nm and below, underscoring the centrality of these advanced processes in TSMC's business and the broader tech ecosystem.

But TSMC wouldn't be itself if it wasn't planning to go deeper. The company plans to begin production of its 2nm node by late 2025, promising significant gains in power efficiency and performance. Looking further ahead, mass production of the 1.4nm (14 angstroms) process is slated for 2028, offering 10–15% higher speeds or 25–30% lower energy use compared to 2nm.

TSMC Earnings On Deck July 17

The reason that TSM is a Zacks #1 Rank (Strong Buy) currently is that analysts have been raising their EPS estimates lately as the already-fierce pace of the AI buildout accelerates.

In the past two months, the Zacks consensus for 2025 has risen from $9.00 to $9.28, representing 32% annual growth, while sales are projected to top $117 billion for a 30% advance. Analysts and investors usually have a good read on their quarterly estimates since TSMC issues a monthly sales report. June numbers are due July 10.

Next year's EPS estimate moved up 5% from $10.34 to $10.89, anticipating profit growth of over 17%, matching the topline advance as it is projected to ascend to $137 billion.

Incidentally, while we have held NVDA shares in my TAZR Trader portfolio since late 2022 from $12.50, we were able to take advantage of a big buying opportunity during the "tariff tantrum" in April and scooped TSM shares at $145.

The fact that TSM hit new highs over $235 last week confirms that large investors are still betting on the AI revolution as being the difference maker in a global economy where trade wars, inflation wars, and even real wars don't matter as much.

Kevin Cook is a Senior Stock Strategist for Zacks Investment Research where he runs the TAZR Trader portfolio service and keeps a close eye on all-things AI.

Bear of the Day:

Cloudflare is a $67 billion provider of global cloud services that comprise a suite of deeply integrated products, including website and application services solutions, developer-based solutions, other CDN (content delivery network) and consumer offerings.

I want to share details about aspects of its business before I explain how it fell into the cellar of the Zacks Rank. Separately from its lack of earnings momentum, the stock is extremely "rich" on the two most basic valuation metrics at 27X sales and over 200X EPS.

Cloudflare's Business and Customers

Cloudflare’s website and application security offerings ensure internet properties like websites, applications and application programming interfaces (APIs) are fast, reliable, and safe from attack, while website and application performance offerings enhance conversions and user experiences by reducing churn and accelerating web and mobile performance of the customers.

Website and application security solutions include Web Application Firewall, bot management, Distributed Denial of Service, API Gateway, secure socket layer/ transport layer security encryption, secure origin connection and rate limiting.

Website and application performance solutions include services like content delivery, load balancing, Domain Name System (DNS), argo smart routing, video stream delivery, Cloudflare Registrar and Cloudflare Waiting Room.

Cloudflare One is a Zero Trust network-as-a-service platform with two components: network services, which deliver network connectivity, security and performance to customers as a service; and zero trust services, which are the products that protect, inspect and privilege data.

Cloudflare’s products and services network spans over 310 cities in more than 100 countries globally. Its network includes more than 13,000 major Internet Service Providers, cloud service providers and enterprises.

In 2024, Cloudflare reported revenues of $1.67 billion, which was 28.8% higher than the figure reported in the previous year. The company derived about 48% of its revenues from outside the United States for the past five years.

As of 2024, Cloudflare had about 237,714 paying customers and 3,497 large customers.

The company faces competition from on-premise network hardware vendors like Cisco, Check Point, Palo Alto, Fortinet, Juniper and F5, point solution vendors such as Oracle and Zscaler and several other public cloud services providing companies.

You can read yesterday's update here...

Cloudflare Improves Sales Execution: Will Margin Gain Continue?

Cloudflare Growth in the AI Economy

Two weeks ago I profiled a NET competitor in the CDN space Akamai. The growth slowdown was obvious in AKAM's numbers.

But besides the valuation concerns, NET seems to be holding its own with projected 25% revenue growth this year to cross $2 billion and a repeat expected for next year to cross $2.5B.

The catch is a slip in EPS estimates for this year and next. And since the current Zacks consensus calls for only 5% EPS growth this year, the rally to 200X earnings is a bit head-spinning for some investors.

Cooker's Take: I think NET is seen as a key player in the bandwidth and delivery of all the new Gen-AI video tools, like Google's Veo 3 and other emerging players. These tools are exploding content engagement exponentially. Which means content production will likely soar to take advantage.

That's why the stock has run and is just waiting for the next few quarters to show up with sales and earnings receipts. The Zacks Rank will let you know.

For the latest in AI developments impacting companies like NET and the entire tech industry, be sure to catch the multimedia program The Week In AI where we break down the innovations, the controversies, and the break ups in Silicon Valley's greatest revolution.

Additional content:

Will "Project Elevate" Keep Driving Comps at Dollar General?

Dollar General Corp.’s "Project Elevate" initiative is specifically aimed at strengthening performance in its existing stores to increase same-store sales growth. Early results show that the effort is gaining momentum. But can this sustain the same-store sales growth? Let’s check out.

The "Project Elevate" program focuses on enhancing existing locations that are not yet slated for a full renovation. This encompasses physical asset improvements, merchandising optimization, product adjacency adjustments and comprehensive category enhancement across roughly 80% of the store footprint. These remodels are notably cost-efficient compared to new store constructions or comprehensive "Project Renovate" remodels.

Dollar General's goal for Project Elevate stores is to achieve first-year annualized comparable sales lifts ranging from 3% to 5%. In the first quarter of fiscal 2025, Dollar General completed 668 Project Elevate remodels, alongside 559 Project Renovate remodels. Collectively, these two remodel programs are expected to impact approximately 20% of the total store base annually.

Given that Dollar General reported a 2.4% increase in overall same-store sales in the first quarter, driven by a 2.7% increase in the average transaction amount, the incremental boosts from Project Elevate could contribute significantly to sustaining this momentum. The success of these targeted remodels in enhancing the shopping experience and optimizing product offerings will be crucial for ongoing same-store sales expansion. With about 2,250 Elevate remodels planned for fiscal 2025, the potential sales lift could be significant.

How Are SFM and TGT Tracking Sales Growth Versus DG?

Sprouts Farmers Market, Inc. is showing that store-level investment and strategic enhancements can pay off, as evidenced by its impressive 11.7% comparable store sales growth in the first quarter of 2025. Sprouts Farmers is benefiting from stronger foot traffic, supported by e-commerce gains and targeted merchandising. With a focus on supply-chain upgrades and private-label expansion, Sprouts Farmers continues to drive in-store engagement and loyalty, positioning itself as a standout player in the evolving retail landscape.

Target Corp. experienced a 3.8% decline in comparable sales, following a 1.5% increase in the preceding quarter. This drop was attributed to a 5.7% fall in Target’s comparable store sales, which was somewhat offset by a 4.7% increase in comparable digital sales. Target highlighted that traffic, or the number of transactions, dropped 2.4%, and the average transaction amount decreased 1.4%.

Dollar General’s Price Performance, Valuation and Estimates

Dollar General stock has rallied 35.2% over the past three months compared with the industry’s growth of 3.9%.

Dollar General’s forward 12-month price-to-earnings ratio of 19.30 reflects a lower valuation compared to the industry’s average of 32.63. DG carries a Value Score of B.

The Zacks Consensus Estimate for Dollar General’s current financial-year sales suggests year-over-year growth of 4.4%, while estimates for earnings per share imply a decline of 2.7%.

Dollar General currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Research Chief Names "Single Best Pick to Double"

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Free: See Our Top Stock And 4 Runners Up

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