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Tag: TSMC

Categories
AI Semiconductors Stocks

Taiwan Semiconductor  Manufacturing (TSM)  Hits It Out Of The Park

What a great start to the earnings season! 

TSM is up 5% premarket after a massive beat and terrific guidance for AI demand.

TSM, the indispensable chip producer and source for some of the world’s largest tech companies, including Apple (AAPL), Nvidia (NVDA), AMD (AMD), and other chipmakers produced outstanding results this morning.

Q4 Metrics

Sales up 37% YoY to $26.88B

Earnings per American Depositary Receipt $2.24, up 69% YoY compared to $1.44 

Both top and bottom line numbers surpassed analysts’ expectations.

“Our business in the fourth quarter was supported by strong demand for our industry-leading 3nm and 5nm technologies,” said Wendell Huang, senior VP and CFO of TSM in the earnings press release.

Strong AI momentum

TSMC’s brilliant Q4 results beat management’s guidance, and confirmed the strong AI momentum for 2025, disproving any notions about reduced or waning demand. With $300Bn in planned Capex by just the hyperscalers, I believe investors’ concerns are misplaced.

Management highlighted TSM’s growing collaborations with the memory industry during the earnings call, reinforcing confidence in strong and accelerated HBM demand, which bodes well for HBM makers like Micron (MU).

Closer interaction with HBM makers also suggests a strong foundation for the potential ramp of TSM’s 3nm node and upcoming 2nm node, which would be essential for AI development.

TSM has de-risked geo-political issues with its overseas factories in Arizona and Kumamoto. It also noted that it could manage further export controls from the US government to China, besides only 11% of their sales were to China.

“Let me assure you that we have a very frank and open communication with the current government and with the future one also,” said Wei when asked about the current and next U.S. administrations.

Any de-risking is a tailwind for increasing multiples and valuation for the stock. I had recommended TSM earlier stating that the geo-political concerns shouldn’t devalue the crown jewel of the semiconductor industry.

Q4 Revenue by Technology

TSM said 3nm process technology contributed 26% of total wafer revenue in the fourth quarter, versus 15% in the year-ago period, and 20% in the third quarter of 2024.

The 5nm process technology accounted for 34% of total wafer revenue, compared to 35% in the same period a year ago, and 32% in the third quarter of 2024. Meanwhile, 7nm accounted for 14% of total wafer revenue in the fourth quarter versus 17% a year earlier, and in the third quarter of 2024.

Total 3nm+5nm = 26+34 = 60% – that’s a fantastic high-margin business.

Advanced technologies (7nm and below) accounted for 74% of wafer revenue.

Q4 Revenue by Platform

High Performance Computing represented 53% of net revenue, up from 43% in the fourth quarter of 2023. – Nvidia, AMD, Broadcom.

The company’s smartphone segment represented 35% of net revenue, versus 43% in the year-ago period. – Apple

Q4 Revenue by Geography

Revenue from China — Taiwan Semi’s second-biggest market by revenue — accounted for 9% of the total net revenue in the period, down from 11% in the year-ago period and in the third quarter of 2024.

North America accounted for 75% of total net revenue coming from it, compared to 72% a year earlier, and 71% in the third quarter of 2024.

Outlook

“Moving into the first quarter of 2025, we expect our business to be impacted by smartphone seasonality, partially offset by continued growth in AI-related demand,” said Huang.

TSM expects capital expenditure to be between $38B to $42B in 2025. The amount is up to 19% more than analysts’ expectations, according to a Bloomberg report.

In the first quarter of 2025, TSM expects revenue to be between $25B and $25.8B (midpoint at $25.4B), consensus of $24.75B. That’s a raise.

Categories
Semiconductors Stocks

Taiwan Semiconductor Earnings Update (TSM) 

TSM hit it out of the park last week, confirming that the high-performance semiconductor sales are doing extremely well. 

Q2 revenue growth of 32.8% y/y and net income growth of 29% y/y. 

Q3 expected to set another revenue record on strong AI and smartphone demand, full year guidance raised. Full Year expectations are for 28% and 24% earnings growth to $6.4 per share. 

3Nm (the most advanced node powering Nvidia, Apple, etc.) revenue was 15% of sales. Nvidia’s not the only company with higher prices, they in turn pay TSM quite well for 3Nm processing! 5Nm also went to 35% of sales – the two now dominate TSM sales with 50%. 

If TSM didn’t have geopolitical risks from China, and Trump demanding payments for protection didn’t help either, this would have been easily 40x earnings, over $250 per share. given the technological and market share lead. Overall, TSMC should continue to dominate in advanced process nodes and high-volume manufacturing for many years. 

I had sold 20% around $183 last June, but am going to hold on to the rest, there’s really nothing much we can do with Chinese tensions – if there are nasty developments from that front, we’ll have much bigger problems than the price of TSM! 

Categories
Semiconductors

Teradyne (TER) Earnings Preview: BUY at $105-$107 Amid Strong Growth Prospects

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Teradyne reports Q4-23 earnings after the market today.

TSM is Teradyne’s biggest customer for its semiconductor testing equipment, and its bullish guidance of 20-25% growth for 2024 is a big plus for Teradyne; especially after Teradyne’s two years of declining sales and earnings, a lot of which was pandemic indigestion and the slow rollout of the N3 process node from TSM in 2023. However,  N3 production and delivery is going to expand tremendously in 2024 and 2025 and will spur demand for  Teradyne’s testing equipment.

This probably will not be evident in 2023 Q4 results. Q4 expectations are low – only $0.67 in EPS and $675Mn in revenues, and for the full year 2023 are $2.70 in EPS and 2.67Bn in sales.  In my opinion, consensus earnings and revenues for 2024 are too low at $3.64 and $3Bn in sales – instead,  *I believe earnings will be between $4 to $4.25, and sales over $3.2Bn*. Teradyne has good operating leverage and earnings should grow to over $6 by 2025. *That’s over 40% earnings growth for the next two years.*

Categories
Stocks

Palantir and TSMC: Strong Long-Term Investment Opportunities in Data Analytics and Semiconductor Industry

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*Palantir: (PLTR) Buy, $16.50  One year target $20.* 

*Invest 5 Years, 18-20% annual return.*

EPS Growth P/E PEG Sales Sales Growth P/S PS/G

0.30 29% 55 1.9 2.2 24% 16 67%

Palantir is a solid performer in the Data Analytics and AI space.

Their government business segment is a massive cash cow and a moat, because of long duration and sticky contracts and switching costs. 

The commercial segment is growing much faster at 50%, and will be its growth engine, with the help of its Artificial Intelligence Platform (AIP), which  tripled the number of users in the past quarter, with over 300 organizations using the new product in the last 5 months.

The stock is expensive especially after doubling last year but can be bought in installments and declines. I own some with an average cost of $15.

CPI Report: Inflation was slightly higher than expected.

Taiwan Semiconductor  Manufacturing(TSM) Buy, $100  One year target $120. 

Invest 5 Years, 15 % annual return. P/E 20, 3-5 year EPS growth 18-20%.

The Semiconductor foundry (manufacturing) leader by far with about 50% market share has large and deep moats in new processes, scale and costs. The semiconductor industry would collapse without it – it would take years for Global Foundries, Intel, Samsung, et al to even come close to catching up. Consider that TSM is spending up to $40Bn to set up a new foundry in Arizona,  and it’s having trouble finding enough qualified people for its plant. 

Revenue growth of 12-14% and earnings growth of 18-20% for the next three years augur well for the company. Normally TSM would be priced at over 40X earnings and closer to 10x sales, about twice the current price. Unfortunately, it being located in Taiwan and with China’s open design on it – multiples will always stay lower because of these geopolitical tensions. Still, the stock has rewarded investors well in the past with steady appreciation in the mid teens. It’s a must have for the portfolio specially for long term steady growth.

Palantir: (PLTR) Buy, $16.50  One year target $280. 

Invest 5 Years, 16-20% annual return. P/E 34, 3-5 year EPS growth 14-16%.

CPI Report: Inflation was slightly higher than expected.

December Consumer Price Index: +0.3% M/M vs. +0.2% expected and +0.1% prior.

+3.4% Year on Year  vs. 3.2% expected and +3.1% prior month

Core CPI, which excludes food and energy: +0.3% M/M vs. +0.2% expected and +0.3% prior. +3.9% Year on Year vs. 3.8% expected and +4.0% prior.

Stock Futures are flat as is the 10 year Treasury yield at 4.02%