TSMC’s Second-Quarter Sales Soar by 40% on AI Boom: What It Means for Investors

TAIPEI, Taiwan – Taiwan Semiconductor Manufacturing Co. experienced a significant surge in sales during the second quarter, primarily driven by the growing demand for AI-related technologies worldwide. The company, recognized as the primary supplier for Nvidia Corp. and Apple Inc.’s most advanced chips, reported a revenue of NT$207.9 billion ($6.4 billion) in June. This strong performance led to a 40% growth in sales for the June quarter, reaching NT$673.5 billion, exceeding the projected 35.5% increase.

The boost in sales comes amidst a global trend in data center investments related to artificial intelligence. As businesses worldwide invest in AI infrastructure, there has been a rise in demand for hardware components such as Nvidia chips. This surge in demand has had a positive impact on TSMC’s market value, as the company briefly hit a $1 trillion market capitalization. Analysts are optimistic about TSMC’s future potential, with expectations of increased earnings through potential price adjustments for customers by 2025.

While smartphone sales have been relatively lackluster, particularly due to the impact of the pandemic, TSMC has managed to compensate for this with the influx of AI chip orders. A crucial factor contributing to TSMC’s success is its longstanding partnership with Apple, the company’s largest customer. In addition to TSMC’s strong performance, other AI-related stocks in Taiwan have collectively contributed to the significant growth of the benchmark Taiex Index by over 40% in the past year, despite looming concerns over US-China geopolitical tensions.

TSMC’s impressive sales performance for the second quarter has been attributed to the increasing demand for CoWoS advanced packaging, which is expected to help mitigate margin dilution from the 3nm ramp-up. Analysts anticipate that TSMC will continue to experience robust sales, supported by the strong demand for its 3nm and CoWoS packaging. However, there are concerns about the valuation of AI investor favorite Nvidia, as some analysts have downgraded the stock due to its perceived “fully valued” status. Nevertheless, Nvidia’s shares have experienced substantial growth this year, reflecting investors’ confidence in the company’s future prospects.