Taiwan Semiconductor Manufacturing, the world's largest semiconductor manufacturer, reports strong sales growth of 45% for July, confirming its position as a global leader in artificial intelligence (AI) chip manufacturing. This growth not only exceeded expectations from the June quarter, but also indicated continued strong demand for the AI chips it makes for giants such as Nvidia and Advanced Micro Devices (AMD).

The company's revenue for July reached a whopping 256.95 billion New Taiwan dollars (approximately US$7.9 billion). Analysts estimate that TSMC's third-quarter sales should grow 37% to TWD747.4 billion, with the July results suggesting that TSMC could even surpass those expectations.

TSMC $TSM+5.3% plays a key role in the global demand for AI chips, making it a preferred manufacturer for companies like Nvidia and AMD. The company is also the exclusive processor supplier to Apple Inc. whose iPhones are now enjoying more customer interest again after pandemic slumps. Thanks to these factors, TSMC recently raised its full-year growth outlook above the 20% it originally expected.

TSMC

TSM

$176.22 $8.94 +5.34%

Capital Structure

Market Cap

769.1B

Enterpr. Val.

24.0T

Valuation

P/E

29.7

P/S

10.2

Open $168.46

Day range $167.05 - $171.60

52 week range $84.02 - $193.47

TSMC's CEO, C.C. Wei, said at the company's last earnings release that TSMC has room to raise prices as more customers switch to cutting-edge technologies and competition for limited manufacturing capacity increases. High-performance computing, including AI, accounted for 52% of TSMC's revenue last quarter, the first time the segment surpassed half of total revenue.

Despite this positive news, however, investors have begun to question whether large tech companies' investment in AI-enabled infrastructure will actually yield significant gains. Concerns have also been raised about possible delays in the development of Nvidia's next generation of AI chips, which could affect progress in this emerging technology.

Experts expect further growth

According to analysts at Bloomberg Intelligence, TSMC posted a 44.7% year-over-year increase in sales, the second-highest growth in the past 20 months. This result is in line with expectations of a robust performance in the third quarter and indicates continued strong demand for AI chips and significant orders for 3-nanometer chip production from companies such as Apple, Qualcomm and MediaTek.

Challenges and opportunities

Last week, however, global economic concerns took a toll on the market and interrupted AI growth, leading TSMC shares to plunge 10% in a single day. However, this decline was soon corrected as asset managers took advantage of the situation to make bargain buys.

TSMC remains a key indicator of the AI chip market and its continued growth shows that demand for these technologies is still on the rise. As technology firms continue to invest billions of dollars in AI infrastructure, TSMC remains in a strong position to benefit from this trend.

Source: Yahoo Finance, CNN.

Disclaimer: There is a lot of inspiration to be found on Bulios, but stock selection and portfolio construction is up to you, so always do a thorough analysis of your own.