What Investors Need to Know About TSMC Revenue, AI Boom
We're increasing our target prices for a pair of stocks after Taiwan Semiconductor saw revenues beat market forecasts.
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On Wednesday morning, the largest chip fabricator (contract manufacturer) in the world, Taiwan Semiconductor Manufacturing Company TSM released the firm's monthly revenue update. For the month of June, Taiwan Semi generated a 32.9% year-over-year increase in sales to NT$207.87 billion ($6.83 billion). This brought Q2 revenue to NT$673.51 billion ($20.68 billion), reflecting year-over-year growth for the quarter of 40% in New Taiwan dollars. On the monthly side, Taiwan Semi had enjoyed growth of 60% for April and 30% for May. Remember that the firm had guided for second quarter sales (in U.S. dollars) of $19.6 billion to $20.4 billion, so this is a nice-sized beat.
What this suggests is that demand for elite, high-end, AI-capable GPUs remains high. Taiwan Semi manufactures chips for designers such as Apple AAPL, Nvidia NVDA, Advanced Micro Devices AMD and others. The American Depository Receipts of Taiwan Semiconductor are trading a few percent higher on Wednesday, as are the shares of those stocks just mentioned.
Taiwan Semi is set to report the quarter on July 18, 2024. In U.S. dollars, consensus is for a GAAP EPS of $1.41 on a little more than $20 billion. That would compare to the year ago comps of $1.14 on $15.68 billion. This would be a rough 32% growth in U.S. dollars versus the 28% growth expected by Wall Street. This would be the largest year-over-year growth in sales in U.S. dollar terms for Taiwan Semi since the June 2022 quarter.
Names Reliant on TSM
Readers will recall that I updated my outlook on three chip stocks on Tuesday. The above mentioned Nvidia and Advanced Micro Devices among them. The third name, Micron Technologies MU, manufactures its own memory chips. Other names reliant or at least somewhat reliant upon Taiwan Semiconductor are Arm Holdings ARM, Marvell Technology MRVL, Qualcomm QCOM and Broadcom AVGO, among others.
Checking the Chart
Readers will see that TSM is threatening to break out of an ascending price channel going back to last Autumn. The daily MACD looks to have been re-energized at extended levels, as the stock's reading for relative strength threatens to break into technically overbought territory. The stock's pivot now becomes the upper trendline of our model, which is a moving level, so it becomes difficult to track going forward.
Upon taking and holding that line, these ADRs will move on to the next phase and should or could use that trendline as support. Perhaps we'll switch to a pitchfork model upon such a development.
Our Two Impacted Stocks
Nvidia: The pivot remains $140. Our target price is increased from $168 to $175.
Advanced Micro Devices: The pivot remains the 50-day SMA. Our target price is increased from $193 to $201.
At the time of publication, Guilfoyle was long AMD, NVDA and MU equity.
