The Key Takeaways from TSMC’s Q4 Earnings

TSMC says the ongoing AI boom and demand for high-performance computing could boost its revenues by up to 26% this year.

Taiwan Semiconductor Manufacturing Company (NYSE: TSM) reported net income and revenue that beat analysts’ expectations in Q4 2023. The company expects notable revenue growth in the new fiscal year, fueled primarily by artificial intelligence and high-performance computing. As a key player in the semiconductor and consumer electronics sectors, the recovery in TSMC’s sales will likely benefit other stocks from these categories. 

TSMC Says Revenue Can Surge 26% in 2024 Amid AI Expansion

TSMC said its revenue could surge as much as 26% in 2024, citing growth in the global electronics industry driven by the unprecedented rise of generative AI.

This forecast comes as TSMC reported a 19.3% year-on-year decline in fourth-quarter net income to 238.71 billion New Taiwan dollars ($7.48 billion), with revenue remaining relatively stable at NT$625.52 billion compared to the previous year. Wei anticipates a full-year revenue increase ranging from 21% to 26%.

The quarterly decline in TSMC’s net income was less severe than anticipated, indicating a potential stabilization in the chip industry after a downturn. Recent weeks have seen positive signals of recovery in the chipmaking sector, with the Semiconductor Industry Association noting an increase in chip sales in November following over a year of declines. 

TSMC, a key player with major clients including Qualcomm Inc. and Apple, will likely witness sales stabilization as the consumer economy strengthens. Consequently, more robust sales could potentially lead to a recovery in stock prices in the consumer electronics sector. 

Wei’s forecast of a double-digit revenue increase this year is primarily based on the continued expansion of production for high-end AI chips. The CEO said TSMC anticipated that the annual growth rate for AI computing could hit 50% in the coming years, while AI processors could contribute 15-20% to total revenue in the following five years. TSMC’s biggest AI chip clients include the rapidly growing Nvidia and AMD. 

“So far today, everything you saw on the AI [computing chips] is from TSMC. We already see that momentum … The demand for AI suddenly picked up since March or April last year after the boom of ChatGPT.”– Wei said.

AI and high-performance computing are predicted to replace mobile and smartphone chips as TSMC’s key growth catalysts, according to analysts. Morgan Stanley’s Charlie Chan forecasts that AI-related semiconductors will constitute 15% of TSMC’s revenue by 2027, with an 18% annual growth rate.

TSMC Pops 6% in Premarket 

In the wake of TSMC’s better-than-expected Q4 profit and revenue, as well as its bullish 2024 guidance, the chipmaker’s shares climbed over 6% in premarket trading Thursday. 

The stock’s performance in 2023 was somewhat of a rollercoaster ride, though it still ended the year with gains of more than 42%, outperforming the broader market. This year, the chipmaker staged a slower start, rising just 1.4% year-to-date. 

The broader equity market, notably the S&P 500, has also been slightly down since January 1 due to renewed uncertainty about the Federal Reserve’s monetary policy.

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Originally Posted January 18, 2024 – The Key Takeaways from TSMC’s Q4 Earnings

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