Key Highlights
- Taiwan Semiconductor’s American depositary receipts (TSM) declined 3.1% in after-hours trading following record pre-earnings levels
- First-quarter revenue increased 8% sequentially to NT$1.134 trillion, while gross margin reached 66.2%, surpassing the 63–65% guidance range
- Earnings per share of NT$22.08 exceeded Wall Street consensus by 7%
- Company cautioned about possible extended supply chain interruptions for helium and bromine due to Middle Eastern tensions
- Needham analysts lifted their TSM price objective to $480 from $410, reiterating their Buy recommendation
Taiwan Semiconductor Manufacturing (TSM) retreated 3.1% in American markets Thursday, followed by an additional 2.4% decline in Taipei trading Friday, as market participants took profits following a substantial rally preceding the earnings release.
Taiwan Semiconductor Manufacturing Company Limited, TSM
Shares had reached an all-time peak of T$2,101.46 on the Taipei exchange earlier in the week before reversing course.
TSMC unveiled record first-quarter profitability, with revenue advancing 8% from the previous quarter to NT$1.134 trillion. The gross margin figure of 66.2% exceeded the company’s forecast band of 63–65%.
Earnings per share registered at NT$22.08, topping analyst projections by 7%.
Looking to the second quarter, executives forecast an 11% sequential revenue gain. This projection significantly outpaces the historical seasonal pattern of approximately 6% and surpasses Wall Street’s 7–8% estimates.
Management attributed the robust outlook to persistent strength in artificial intelligence demand, especially for cutting-edge processors deployed in cloud computing infrastructure.
Geopolitical Material Concerns
Notwithstanding the impressive financial performance, TSMC highlighted a brewing challenge: potential interruptions in specialty chemical supplies, namely helium and bromine, connected to escalating tensions involving the United States, Israel, and Iran.
The regional conflict has impeded material shipments from Middle Eastern sources to Asian manufacturing hubs, with attacks on industrial sites causing temporary production halts.
TSMC indicated it has arranged alternative chemical suppliers for immediate needs, though long-term availability remains unclear.
Production Capacity Debate
During the earnings conference call, financial analysts questioned CEO C.C. Wei about whether manufacturing bottlenecks might drive clients toward competing foundries.
Wei firmly dismissed these concerns, noting that establishing independent semiconductor production capabilities matching TSMC’s sophistication would require at least three years and substantial financial commitments.
Earlier industry reports indicated Nvidia might experience production delays for its upcoming Vera Rubin artificial intelligence processors stemming from TSMC capacity limitations.
TSMC announced plans to escalate capital expenditures in forthcoming quarters to accommodate expanding customer requirements.
Regarding valuation metrics, Needham elevated its TSM price target to $480 from $410 after reviewing the quarterly results, maintaining its Buy stance.
GuruFocus estimates TSMC’s fundamental value at $261.00, suggesting the stock trades approximately 39% above that benchmark at its present $363.35 price point.
The company’s price-to-earnings multiple stands at 34x, compared to its five-year median of 22.55x.
Insider transactions during the most recent three-month period reflected $819,595 in stock acquisitions with zero reported dispositions.
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