TSMC Delivers Earnings Beat, Stock (NYSE: TSM) Moving Up

Taiwan Semiconductor Manufacturing's stock (NYSE: TSM) looks set for a bullish start to the day, as the world's leading semiconductor foundry, beat earnings expectations on top and bottom lines. EPS came in at NT$2.24 against a consensus of NT$2.22, with revenue of $NT868.84 beating the expectation of NT$855.86 by 1.5%.

The growth is driven largely a strong demand for chips, particularly in the artificial intelligence (AI) sector.

With TSM's shares already having seen growth of more than 100% over the past 12 months, the indicative overnight price appears set to start pre-market up in the region of 7% at ~$221. The 52 week high ($222.20) on the stock could be challenged as the day progresses, with markets currently liking what they see from the firm.

TSMC's major clients, Apple and Nvidia, contribute significantly to its revenue, thanks to their extensive use of TSMC's cutting-edge chip technology in their products.

Despite the positive outlook, TSMC faces challenges, particularly with the US government's technology restrictions on China, coupled with potential import tariffs from the incoming Trump administration. These geopolitical factors could influence TSMC's operations and profitability.

In response to these challenges, TSMC is advancing its strategic investments, with a notable cost of US$65 billion allocated for three new plants in Arizona. This venture is TSMC's largest foreign direct investment in the U.S., underlining its commitment to expanding production capacity amid growing global chip demand. Edward Chen, a key figure in TSMC, has emphasized the importance of progress on the Arizona fab and its yield rates.

Looking ahead, TSMC has announced that its capital expenditure for 2024 will slightly exceed US$30 billion, with expectations of increased spending in 2025. These investments indicate TSMC's commitment to maintaining its leadership in the semiconductor industry while addressing the global demand for semiconductors.

TSMC's anticipated fourth-quarter profit surge reflects its ability to navigate a challenging geopolitical landscape while strategically investing in its future growth. As the demand for cutting-edge technology continues to rise, TSMC's role in the global semiconductor market remains pivotal.