Key Takeaways
- Taiwan Semiconductor’s American depositary receipts (TSM) declined 3.1% in after-hours trading following an earnings-driven rally
- First quarter revenue jumped 8% sequentially to NT$1.134 trillion, while gross margins reached 66.2%, surpassing the 63–65% forecast
- Earnings per share of NT$22.08 exceeded Wall Street projections by 7%
- Management highlighted possible extended supply chain disruptions for helium and bromine stemming from Middle Eastern tensions
- Wall Street firm Needham boosted its TSM price objective to $480 from $410, reiterating a Buy recommendation
Shares of Taiwan Semiconductor Manufacturing (TSM) retreated 3.1% during Thursday’s U.S. trading session and shed an additional 2.4% in Friday’s Taipei session, as market participants took profits following a substantial pre-earnings rally.
Taiwan Semiconductor Manufacturing Company Limited, TSM
The equity had touched an all-time high of T$2,101.46 on the Taipei exchange earlier in the week before reversing course.
TSMC unveiled record-breaking first quarter profitability, with revenues advancing 8% from the previous quarter to reach NT$1.134 trillion. The company’s gross margin settled at 66.2%, comfortably exceeding its previously issued guidance band of 63–65%.
The chipmaker’s earnings per share registered at NT$22.08, topping analyst consensus by 7%.
Looking ahead to the second quarter, executives forecast revenue growth of 11% quarter-over-quarter. This projection significantly outpaces the historical seasonal increase of approximately 6% and surpasses analyst forecasts calling for 7–8% growth.
Management attributed the robust outlook to sustained momentum in artificial intelligence applications, especially for cutting-edge processors deployed in hyperscale data centers.
Material Supply Concerns Emerge
Despite delivering impressive financial performance, TSMC raised a red flag regarding potential disruptions to specialty material supplies, particularly helium and bromine, connected to escalating U.S.-Israel tensions with Iran.
The regional conflict has interrupted material shipments from the Middle East to Asian manufacturing hubs, with attacks on production infrastructure causing temporary shutdowns at some facilities.
While TSMC confirmed it has arranged alternative chemical suppliers for the immediate future, executives acknowledged that long-term supply stability remains questionable.
Manufacturing Capability Debate
During the quarterly conference call, financial analysts questioned CEO C.C. Wei about whether production bottlenecks might drive customers to explore alternative foundry partners.
Wei dismissed these concerns, emphasizing that establishing independent semiconductor manufacturing capabilities comparable to TSMC’s would require a minimum three-year timeline and substantial capital commitments.
Earlier reports this year indicated that Nvidia could experience production delays for its upcoming Vera Rubin AI accelerators due to constrained availability at TSMC facilities.
The foundry giant announced intentions to boost capital expenditures in upcoming quarters to accommodate expanding customer demand.
From a valuation perspective, Needham elevated its TSM price target to $480 from $410 after reviewing the quarterly results, maintaining its Buy stance.
GuruFocus calculates TSMC’s fundamental value at $261.00, suggesting the stock trades approximately 39% above that benchmark at its present price of $363.35.
The company’s price-to-earnings multiple stands at 34x, notably above its five-year median of 22.55x.
Corporate insider transactions during the trailing three-month period included $819,595 worth of share purchases with zero documented sales.
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