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TSM Earnings: TSM Stock Surges as AI Chip Demand Fuels Stellar Q2 Results

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TSM stock is trending higher in pre-market trading at the time of writing, driven by booming demand for AI and smartphone chips.

TSM Earnings: TSM Stock Surges as AI Chip Demand Fuels Stellar Q2 Results

Shares of Taiwan Semiconductor Manufacturing (TSM), a.k.a. TSMC, are rallying in pre-market trading after it reported blockbuster results for the second quarter of fiscal 2025. The company’s Q2 net profit (in U.S. dollars) surged by 67% year-over-year and sales increased by 44.4%, driven by continued demand for artificial intelligence (AI) chips.

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TSMC is the world’s largest contract chip manufacturer, serving leading chipmakers such as Nvidia (NVDA), AMD (AMD), and Apple (AAPL). Year-to-date, TSM stock has gained nearly 21%.

TSMC Is Riding the AI Wave

The semiconductor processor manufacturer’s revenue rose 44.4% year-over-year to $30.07 billion, beating the higher end of its own guidance of $29.2 billion. Similarly, diluted earnings per ADR (American Depositary Receipt) of $2.47 jumped nearly 67% compared to its Q2FY24 figure of $1.48.

TSMC attributed the strong performance to continued robust demand for AI and high-performance computing (HPC). Importantly, shipments of advanced technologies, including 3-nanometer (nm), 5nm, and 7nm processes, accounted for about 74% of total wafer revenue in Q2. Notably, the 3nm chips are used in smartphones and saw a significant boost in iPhone demand ahead of Trump’s tariffs, while the 5nm chips are primarily used for AI applications.

From a platform perspective, HPC contributed 60% and smartphones contributed 27% of total Q2 revenue. Meanwhile, from a geographic perspective, North America was the largest contributor at 75%, followed by China and Asia Pacific at 9% each, Japan at 4%, and EMEA at 3%.

TSMC Guides for Robust Q3 Backed by AI

TSMC has provided a robust outlook for Q3FY25, citing strong demand for its advanced process technologies. Revenue is forecasted to be between $31.8 billion and $33 billion. Meanwhile, gross profit margin is projected between 55.5% and 57.5%, and operating profit margin is expected between 45.5% and 47.5%. TSMC also raised its full-year fiscal 2025 revenue growth guidance to 30%, up from the previous 20%, driven by solid demand for its 3nm and 5nm chips.

Is Taiwan Semiconductor Stock a Buy?

Ahead of the Q2 print, analysts remained highly optimistic about Taiwan Semiconductor’s long-term outlook. On TipRanks, TSM stock has a Strong Buy consensus rating based on seven Buys and one Hold rating. Also, the average Taiwan Semiconductor price target of $237.63 implies that shares are almost fully valued at current levels.

Please note that these ratings could change once analysts revise their recommendations in light of the Q2 results.

See more TSM analyst ratings

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