TSMC's Latest Results Show It Is More Than A Beneficiary Of The AI Hype As It Is One Of One Its Creators

Last Thursday, Taiwan Semiconductor Manufacturing Company Limited TSM reported its second quarter results, surpassing both top and bottom-line estimates. Surging demand for advanced chips used for developing gen-AI applications has boosted Taiwan listed shares of the world’s leading producer of advanced chips found in everything from smartphones to AI applications, whose clients are the titans Apple Inc AAPL and Nvidia Corporation NVDA, among others, by almost 70% year-to-date.

Second Quarter Highlights

Fueled by its exclusive partnerships with Apple and Nvidia, TSMC reported net revenue grew 40.1% YoY to 673.51 billion New Taiwan dollars ($20.82 billion), surpassing LSEG’s consensus estimate of NT$657.58 billion. 

For the June quarter, net income grew 36.3% YoY to NT$247.85 billion which is about $7.59 billion, also surpassing LSEG’s consensus estimate of NT$238.8 billion.

Third quarter guidance shows continued growth is expected.

TSMC projects third-quarter revenue between $22.4 billion and $23.2 billion, which would represent growth of about 30% to 33%.

2024 is expected to be a strong growth year due to strong smartphone and AI-related demand. As for the annual capital budget, TSMC narrowed the range to between $30 billion and $32 billion, while it previously guided for $28 billion to $32 billion. 70% to 80% of the budget will be allocated to advanced technologies.

TSMC is not only benefiting from the AI hype, it is one of those helping to create it.

TSMC’s latest financial results and optimistic forecasts paint a picture of a leading company at the forefront of the AI revolution, together with Nvidia, which it counts among its clients. Samsung Electronics and Intel Corporation INTEL are trying to challenge its dominance. While TSMC has been the world’s first chip contract maker for years and world’s biggest foundry, its earnings have long been lagging those of Intel, but in 2023, its revenue surpassed those of both Intel and Samsung. It also leads in the operating profit arena. But Intel, who led the industry for decades, is determined to make a comeback and go beyond just fabrication and assembly with an ambitious foundry strategy. Foundry competition is heading up but for now, TSMC is still leading the way and it has the best partners, Apple and Nvidia, on its side.

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