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

Disclosure: Tim Fries has no positions in any of the stocks mentioned, and has no plans to initiate any positions within the 72 hours following the publishing of this article. This article expresses the opinions of Tim Fries. Tokenist Media LLC has no position in any of the stocks mentioned, and does not plan to initiate any positions within 72 hours of the publishing ofthis article. Please consult our website policy for more information.