Strong sales growth amid industry uncertainty
Over October and November, TSMC's combined sales surged by 31.4%, solidifying confidence in the company’s ability to meet or even exceed its quarterly guidance. Analysts project a 36.3% growth in sales for the fourth quarter, a goal that seems attainable given the current momentum. With shares already up 80% this year, TSMC has clearly benefitted from the enormous capital expenditures by companies such as Microsoft and Amazon in building AI-driven server farms and data centers[1].*
AI as a growth engine
Since the introduction of ChatGPT in late 2022, AI has catalyzed a surge in demand for advanced chips, which are the backbone of modern data centers. TSMC has emerged as the industry’s go-to provider, ensuring reliable supply chains for companies racing to dominate the AI space. Even as concerns mount about the immediate returns on these massive investments – given the lack of a universally adopted "killer app" for AI – TSMC’s position remains strong. Its pricing power continues to grow, especially as competitors like Samsung Electronics and Intel struggle to match its efficiency in contract manufacturing.
Navigating challenges
Despite its success, TSMC is not without challenges. US export controls have affected shipments to Chinese AI-chip designers, raising questions about potential growth constraints in the region. Nevertheless, robust global demand for AI-related chips and high-end smartphone components has mitigated these risks. Bloomberg Intelligence reports that if TSMC maintains its two-month average run rate of 68.5%, as it has in previous years, its fourth-quarter sales could reach an impressive NT$861.5 billion.
What this means for my portfolio
TSMC’s performance reaffirms my confidence in its ability to navigate industry headwinds while capitalizing on growth opportunities. Its leadership in cutting-edge chip technology, coupled with strong partnerships with tech giants, places it in a league of its own. While I remain mindful of potential risks, such as geopolitical tensions and shifts in AI adoption, the company’s track record gives me reason to remain optimistic.
Looking ahead, TSMC's growth trajectory seems likely to extend into 2025, fueled by continued demand for AI chips and high-end semiconductor solutions. For now, TSMC remains a core holding in my portfolio, and I am eager to see how it continues to shape the future of technology. [1]
* Past performance is no guarantee of future results
[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or based on the current economic environment which is subject to change. Such statements are not guaranteeing of future performance. They involve risks and other uncertainties which are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.
https://finance.yahoo.com/news/tsmc-posts-34-sales-growth-055123686.html
[1] TSMC's share price performance over the past five years: https://tradingeconomics.com/tsm:us