TSMC sales beat expectations on AI infrastructure boom

(Bloomberg) — Taiwan Semiconductor Manufacturing Co.’s revenue grew at its fastest pace since 2022 in the second quarter, helped by the AI ​​boom that is fueling global data center investment.

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The sole supplier of Nvidia Corp. and Apple Inc.’s most advanced chips said revenue for June came in at NT$207.9 billion ($6.4 billion), up 40 percent in the June quarter to NT$673.5 billion, compared with the average forecast for a 35.5 percent increase.

Wednesday’s earnings figures come as the world’s largest contract chipmaker briefly topped $1 trillion in market capitalization on a wave of investment in data centers and artificial intelligence devices. Companies around the world have been rushing to buy up hardware such as Nvidia chips to build AI-enabled infrastructure. That has prompted Wall Street brokerages to raise their price targets for TSMC, citing a potential move by the chipmaker to charge customers more by 2025 to further boost profits.

The AI ​​chip orders have helped offset disappointing smartphone sales, which are only just emerging from a slump. Apple remains Hsinchu-based TSMC’s biggest customer.

TSMC and other AI-related stocks in Taiwan have lifted the benchmark Taiex Index by more than 40% over the past 12 months, despite widespread concerns about geopolitical tensions between the US and China on the island.

What Bloomberg Intelligence Says

TSMC’s 2Q sales beat points to stronger-than-expected demand for advanced CoWoS packaging. The robust sales will also offset some margin dilution from the 3nm startup and help it secure an earnings win. A key focus for the earnings call will be how much TSMC can negotiate on price increases, buoyed by strong demand for its 3nm and CoWoS packaging.

— Charles Shum, BI Analyst

Valuation concerns, however, are tempering optimism about AI investor darling Nvidia. An analyst at New Street Research downgraded the stock earlier this week, saying it is “fully valued.” Nvidia shares have soared 165% this year, on top of a nearly 240% gain through 2023.

(Adds analyst comment)

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