AI Demand Drives TSMC’s Sales Amid Chip Slump

KEY POINTS

• Taiwan Semiconductor Manufacturing (TSMC) reports higher than projected sales due to increased demand for AI applications.
• TSMC’s second-quarter revenue declined by 10% from the previous year, yet it surpassed analysts’ expectations.
• Despite anticipated challenges in the smartphone sector, TSMC’s performance remains strong due to robust demand for AI chips.

Taiwan Semiconductor Manufacturing (TSMC) recently announced its sales figures, which surpassed expectations thanks to increased demand for artificial intelligence applications. The rise in demand for AI applications has led to greater usage of TSMC’s chipmaking capacity, thereby driving sales.

Demand for AI Bolsters TSMC Sales

TSMC’s revenue for the second quarter totaled NT$480.8 billion ($15.3 billion), marking a 10% decline from the prior year. Despite the drop, the company managed to beat the average analyst estimate of NT$476.2 billion. Sales in June alone reached NT$156.4 billion.

AI Orders Balance Chip Slump

TSMC, a key supplier of AI accelerator chips for Nvidia, has capitalized on the increasing demand for large data model training. Despite an overall slump in the demand for chips, the company’s sales have remained strong due to steady AI orders.

TSMC Shares and Market Position

Prior to the announcement of the monthly sales figures, TSMC’s shares remained stable. Earlier, Goldman Sachs analysts increased their target price for the company to NT$700. Despite cautioning that its revenue might experience a low- to mid-single digit fall in 2023 in US dollar terms, the company’s stocks have risen over 25% since the beginning of the year.

Future Outlook

While TSMC is dealing with a stronger than anticipated downturn in the smartphone sector, its AI chip orders continue to exhibit resilience. Although the company’s reported sales have surpassed consensus, after considering currency fluctuations, the actual results lie at the midpoint of the guidance range. The dynamics of the smartphone sector, therefore, necessitate a close watch, especially with respect to signs of recovery and their potential impact on TSMC’s future earnings.