Taiwan Semiconductor Manufacturing Company (NYSE:TSM), a real juggernaut amongst artificial intelligence (AI) enabled hardware manufacturers, just filed its Form 20-F annual report for 2023. It’s a significant event for the worldwide chipmaker industry – not only based on the corporate’s results but additionally on Taiwan Semiconductor’s message in regards to the market as a complete.
Since Taiwan Semiconductor is the most important contract chipmaker on the planet, the corporate’s foundry supplies essential AI-compatible chips to tech businesses on multiple continents. Thus, even in the event you’re indirectly invested in TSM stock, Taiwan Semiconductor’s recently filed report will almost actually have ripple effects impacting your portfolio.
So, as Taiwan Semiconductor falls into the red today, consider the big-picture implications in addition to the company-specific results. And, keep in mind that an equities market that ascended on AI-hardware hype could just as quickly descend on AI-hardware disappointment.
Taiwan Semiconductor continues its winning streak
Regardless that TSM stock is down today, one can’t blame the corporate’s financial results for this. Taiwan Semiconductor has a stellar track record of quarterly EPS beats, and the corporate continued this winning streak with its expectation-beating first-quarter 2024 results.
Keep in mind, it is a difficult time for Taiwan-based businesses generally because the region recently weathered a large magnitude 7.2 earthquake. This wouldn’t have impacted Taiwan Semiconductor’s first-quarter results, but some investors might worry in regards to the impact of the present quarter.
Yet, in an almost miraculous recovery, Taiwan Semiconductor managed to realize fabrication-tool recovery of greater than 70% inside 10 hours, followed by total recovery by the third day after the quake. This, hopefully, will ensure minimal operational impact on Taiwan Semiconductor’s second-quarter revenue.
Nonetheless, it hasn’t been all bad news for Taiwan Semiconductor throughout the current quarter. In early April, the U.S. Commerce Department announced a $6.6 billion subsidy to Taiwan Semiconductor’s U.S.-based to facilitate advanced semiconductor production in town of Phoenix, Arizona. This might prove to be a win-win for Taiwan Semiconductor and for the U.S. because the nation’s government strives to incentivize domestic AI-chip production.
What about Taiwan Semiconductor’s first-quarter 2024 results, though? Because it seems, there’s loads of positivity to go around. Taiwan Semiconductor generated the equivalent of $18.87 billion in revenue, up 13% 12 months over 12 months. For the present quarter, Taiwan Semiconductor expects to report revenue from $19.6 billion to $20.4 billion – pretty optimistic guidance, considering the magnitude of the earthquake that just happened earlier this month.
The quake wasn’t the one headwind, by the way in which. Taiwan Semiconductor’s first-quarter results were also “impacted by smartphone seasonality, partially offset by continued HPC [high-performance computing]-related demand,” Wendell Huang, the corporate’s chief financial officer (CFO), explained in an announcement.
Turning now to the bottom-line results, Taiwan Semiconductor reported a first-quarter 2024 net profit of 225.49 billion Recent Taiwan dollars (NT), or the equivalent of $6.97 billion within the U.S. That’s up 8.9% 12 months over 12 months, and it’s also ahead of the analysts’ consensus estimate of 215.40 billion NT. it one other way, Taiwan Semiconductor posted earnings of $1.34 per share, versus Wall Street’s forecast of $1.30 per share.
Taiwan Semiconductor’s market-wide warning
Overall, while acknowledging the corporate’s challenges, Huang seemed fairly confident about Taiwan Semiconductor’s growth prospects for the present quarter.
“Moving into second quarter 2024, we expect our business to be supported by strong demand for our industry-leading 3 nanometer and 5 nanometer technologies, partially offset by continued smartphone seasonality,” Huang clarified.
Again, one can discuss with the corporate’s current-quarter revenue guidance and feel confident that Taiwan Semiconductor can exhibit its resilience. This doesn’t necessarily mean that the worldwide AI-hardware industry as a complete will grow as rapidly as previously anticipated, nonetheless. In any case, the world’s chipmaking industry remains to be attempting to recuperate from last 12 months’s chip oversupply.
In case you’re wondering why TSM stock fell into the red today, it’s probably due to Taiwan Semiconductor’s not directly stated warning in regards to the global AI-chip market. Specifically, Taiwan Semiconductor modified its forecast for 2024 overall chip-market growth (excluding memory chips) from “greater than 10%” previously to 10% currently.
That’s not a really pessimistic outlook, really, however the market simply decided to see the glass as half-empty today. Apparently, 10% year-on-year growth isn’t adequate anymore, especially with AI-chip hype at full tilt throughout the past 12 months.
Perhaps it’s an indication that the market expects an excessive amount of and has pushed AI hardware stocks too high, too fast. Still, in light of Taiwan Semiconductor’s impressive quarterly results, it’s probably a reasonably secure bet to carry a number of TSM shares in the event you’re willing to ride out any current-quarter headwinds, anticipated or otherwise.