TSMC Sales Beat Previous Expectations on AI Infrastructure Boom

TSMC Sales Beat Previous Expectations on AI Infrastructure Boom

(Bloomberg) — Taiwan Semiconductor Manufacturing Co.’s second-quarter sales grew at their fastest pace since 2022, boosted by an artificial intelligence boom that’s fueling investment in data centers around the world.

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The sole supplier to Nvidia Corp., Apple’s most advanced chipmaker, said June revenue was NT$207.9 billion ($6.4 billion). That represented a 40% increase on the June quarter to NT$673.5 billion, compared with the median forecast for a 35.5% increase.

The sales figure on Wednesday comes after the world’s largest contract chipmaker briefly hit a $1 trillion market value on a wave of investment in data centers and artificial intelligence-related hardware. Companies around the world are rushing to buy hardware like Nvidia chips to build AI-enabled infrastructure. That has prompted Wall Street brokerages to raise their price targets for TSMC, citing the chipmaker’s potential move to charge customers more in 2025 to boost profits further.

AI chip orders have helped offset lackluster smartphone sales, which are just starting to come off a low. Apple remains Hsinchu-based TSMC’s biggest customer.

TSMC and other AI-related stocks in Taiwan have helped lift the benchmark Taiex index more than 40% over the past 12 months, despite broad concerns about U.S.-China geopolitical tensions across the island.

What does Bloomberg Intelligence say?

TSMC’s Q2 sales outperformance points to stronger-than-expected demand for advanced CoWoS packaging. Strong sales will also offset some of the margin softening from the 3nm ramp-up and help drive better earnings. A key focus of the earnings call will be TSMC’s ability to negotiate price increases, supported by strong demand for 3nm and CoWoS packaging.

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—Charles Shum, Business Intelligence Analyst

However, valuation concerns are tempering optimism about AI investor darling Nvidia. An analyst at New Street Research downgraded the stock earlier this week, saying it was “fully valued.” Nvidia shares are up 165% this year, with gains of nearly 240% in 2023.

(To add analyst comment)

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