TSMC Sales Surge Past Expectations on AI Infrastructure Boom

(Bloomberg) — Taiwan Semiconductor Manufacturing Co.’s second-quarter sales grew at their fastest pace since 2022, buoyed by the AI boom that’s fueling data center investment worldwide.

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The sole supplier of Nvidia Corp. and Apple Inc.’s most advanced chips said revenue for June came to NT$207.9 billion ($6.4 billion). That means 40% growth in the June quarter to NT$673.5 billion, versus the average projection for a 35.5% rise.

The Wednesday sales figure comes after the world’s largest contract chipmaker briefly hit a $1 trillion market capitalization on a wave of investment into artificial intelligence-related data centers and devices. Businesses around the world are racing to buy up hardware such as Nvidia chips to build up AI-supporting infrastructure. That’s prompted Wall Street brokerages to lift their price targets for TSMC, citing the chipmaker’s potential move to charge customers more in 2025 to elevate earnings further.

The AI chip orders have helped make up for lackluster smartphone sales, which are only just emerging from a trough. Apple remains Hsinchu-based TSMC’s biggest customer.

TSMC and other AI-related stocks in Taiwan have helped lift the benchmark Taiex Index by more than 40% over the past 12 months, despite overarching concerns about US-China geopolitical tensions around the island.

What Bloomberg Intelligence Says

TSMC’s 2Q sales beat indicates stronger-than-expected demand for CoWoS advanced packaging. The robust sales will also offset some margin dilution from the 3nm ramp-up and help deliver an earnings beat. A key focus for the earnings call will be how much TSMC can negotiate price increases, backed by strong demand for its 3nm and CoWoS packaging.

— Charles Shum, BI analyst

Valuation concerns are tempering optimism on AI investor darling Nvidia, however. A New Street Research analyst downgrading the stock earlier this week, saying it is “getting fully valued.” Nvidia shares have soared 165% this year, on top of a gain of almost 240% in 2023.

(Adds analyst commentary)

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