Taiwan Semiconductor Manufacturing Company (TSM, Financial) experienced a significant surge in its stock price, buoyed by an optimistic outlook and sustained demand for AI hardware. The company's robust profit margins were highlighted as a key factor alleviating investor concerns in the semiconductor sector, especially following ASML's financial report. TSM increased its revenue forecast, showing confidence in the ongoing AI boom, and indicated that its capital expenditures might surpass this year's levels by 2025.
TSM's stock climbed as much as 13.4%, reaching record highs and pushing its market capitalization past $1 trillion. According to Bernstein, the upward guidance on gross margins and rapid growth in its 3nm process business revenue suggest strong demand for its AI chips. The firm considers a 25% sales growth by 2025 feasible, driven by robust AI demand throughout the latter half of 2024 and insufficient capacity expansion to meet this demand, indicating a prolonged strong growth momentum into 2025. Comments regarding non-AI business demand were not as favorable, but still possibly better than feared.
Citi maintains a "buy" rating on TSM, describing the results as "amazingly exceeding expectations," attributing the success to strong AI demand, solid execution, and increased utilization of advanced processes. The company foresees a structural upside to TSM's long-term revenue compound annual growth rate of 15-20% and gross margin guidance exceeding 53%. Needham also holds a "buy" rating with a price target of $210, noting a "blowout" quarter with revenue, gross margin, and operating margin performance surpassing consensus expectations. TSM expects its AI revenue to more than double this year.
