TSMC Sales Beat Expectations on AI Infrastructure Boom

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

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The sole supplier of the most advanced chips to Nvidia Corp. and Apple Inc. said its June revenue was NT$207.9 billion ($6.4 billion). That represented a 40% increase in the quarter ended June to NT$673.5 billion, compared with the average forecast for a 35.5% increase.

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

AI chip orders have helped offset weak smartphone sales, which are just starting to come off the rocks. 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 geopolitical tensions between the United States and China over the island.

What does Bloomberg News say?

TSMC’s Q2 sales point to stronger-than-expected demand for advanced CoWoS packaging. Strong sales will offset some margin losses 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

Still, valuation concerns are tempering optimism about Nvidia, a favorite of AI investors. An analyst at New Street Research downgraded the stock earlier this week, saying it was “overvalued.” Nvidia shares are up 165% this year, with gains of about 240% in 2023.

(Analyst’s comment added)

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