Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) reported a remarkable 45% increase in revenue for July, surpassing its growth rate from the previous quarter. This surge in revenue has reinforced expectations for a continued robust need for chips centered on artificial intelligence (AI), particularly from major customers such as Nvidia Corp. The positive news bolstered TSMC’s stock by $2.57, or 1.56%, to $167.12 on Friday.
TSMC’s sales for July reached NT$256.95 billion (approximately $7.9 billion). Analysts have projected a 37% increase in TSMC’s revenue for the September quarter, estimating it to be around NT$747.4 billion. The impressive July performance indicates that TSMC may exceed these estimates.
As Taiwan’s largest enterprise and a critical player in the global semiconductor industry, TSMC’s performance is a significant indicator of AI requirements, given its role as the primary chip manufacturer for renowned companies like Nvidia and Advanced Micro Devices Inc. Additionally, TSMC is the exclusive vendor of crucial processors for Apple Inc.’s iPhones, which are currently experiencing a resurgence in the smartphone market post-Covid.
In July, TSMC upwardly revised its full-year growth guidance to above the mid-20% range it had earlier forecasted. During its recent earnings report, the company’s CEO, Wei, provided an optimistic outlook on the company’s business prospects.
Wei indicated that TSMC might have the capacity to increase prices as new customers start using its high-tech offerings and compete for limited production capacity. Notably, high-performance computations, driven by AI, delivered 52% of TSMC’s revenue in the recent quarter, marking the initial time it represented over 50% of the company’s earnings.
Despite the positive financial performance, shareholders have expressed concerns about whether the substantial investments made by major tech companies in the AI framework will yield significant profits. Additionally, there are worries about a potential postponement in Nvidia’s design of a new breed of AI chips, raising questions about the rate of progress in this emerging technology.
The global economic scenario has also impacted investor sentiment, leading to a brief interruption in the AI rally. This rally significantly increased the market value of prominent players such as TSMC. Recently, TSMC’s shares experienced a 10% drop in one day as investors chose to encash on certain stocks that had appreciated rapidly. However, the company quickly recouped a major portion of the lost ground as money managers identified a good investment opportunity.
TSMC is also a significant recipient of the CHIPS and Science Act, intended to boost state-of-the-art chip production in the United States. Earlier this year, the White House revealed its intention to bestow on TSMC up to $6.6 billion in grants. These funds are intended to support the construction of a third foundry at TSMC’s production facility in Arizona, further solidifying the company’s strategic position in the global semiconductor supply chain.
The upbeat sales data is expected to keep the stock of Taiwan Semiconductor slightly bullish in the near term.
The historical price chart indicates that Taiwan Semiconductor’s stock is rising after breaking the ascending triangle formation. The base of the ascending triangle is now expected to act as support. Additionally, the stock is trading above its 50-day moving average, while the MACD indicator is showing a positive reading. Therefore, we anticipate Taiwan Semiconductor’s stock to remain in an uptrend for the upcoming trading sessions.
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