Key Highlights
- Taiwan Semiconductor’s U.S. shares (TSM) declined 3.1% in after-hours trading following a pre-earnings rally to record levels
- First quarter revenues increased 8% to reach NT$1.134 trillion, while gross margin of 66.2% exceeded the projected 63–65% range
- Earnings per share of NT$22.08 surpassed analyst projections by 7%
- The chipmaker cautioned about possible extended supply chain disruptions affecting helium and bromine due to Middle Eastern geopolitical tensions
- Needham upgraded its TSM price target from $410 to $480 while reaffirming a Buy recommendation
Taiwan Semiconductor Manufacturing (TSM) experienced a 3.1% decline in U.S. trading Thursday, followed by an additional 2.4% drop in Taipei on Friday, as market participants took profits following the stock’s impressive pre-earnings momentum.
Taiwan Semiconductor Manufacturing Company Limited, TSM
The shares had reached an all-time peak of T$2,101.46 on the Taipei exchange earlier in the week before retreating.
TSMC delivered record-breaking first quarter profitability, with revenues advancing 8% sequentially to NT$1.134 trillion. The company’s gross margin reached 66.2%, comfortably exceeding its own forecast range of 63–65%.
The quarterly earnings per share figure of NT$22.08 topped Wall Street consensus estimates by 7%.
Looking ahead to Q2, company leadership forecasted an 11% sequential revenue gain. This projection significantly outpaces the historical seasonal increase of approximately 6% and surpasses analyst consensus of 7–8%.
Management attributed this robust outlook to sustained robust appetite from the artificial intelligence sector, especially for cutting-edge semiconductors deployed in data center infrastructure.
Geopolitical Material Concerns
Despite posting impressive financial metrics, TSMC highlighted a looming challenge: potential interruptions in specialty material availability, specifically helium and bromine, connected to the escalating U.S.-Israel tensions with Iran.
The regional conflict has interfered with material transportation routes from the Middle East to Asian manufacturing hubs, and strikes on industrial facilities have resulted in temporary production halts.
TSMC indicated it has established alternative chemical suppliers for immediate needs, but acknowledged that the extended timeline remains clouded with uncertainty.
Manufacturing Capacity Debate
During the earnings conference call, analysts questioned CEO C.C. Wei about whether capacity limitations might drive clients toward competing semiconductor manufacturers.
Wei dismissed these concerns, emphasizing that establishing independent chipmaking capabilities matching TSMC’s sophistication would require at least three years and substantial capital expenditure.
Earlier industry reports indicated Nvidia might encounter production delays for its upcoming Vera Rubin AI processor lineup due to TSMC’s capacity constraints.
TSMC announced intentions to boost capital expenditures in upcoming quarters to accommodate expanding market demand.
From a valuation perspective, Needham elevated its TSM price objective to $480 from $410 post-earnings, maintaining its Buy stance.
GuruFocus estimates TSMC’s fair 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, versus a five-year median of 22.55x.
Insider transaction data over the previous three months revealed $819,595 in stock purchases with zero reported sales.
