Taiwan Semiconductor Manufacturing (TSM), the world’s largest contract chipmaker, on Thursday beat analyst estimates for the fourth quarter, thanks to strong sales of advanced chips for artificial intelligence applications. TSM stock jumped on the news.
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The company, better known as TSMC, earned $2.24 per U.S. share on sales of $26.88 billion in the quarter ended Dec. 31. Analysts polled by FactSet had expected TSMC to earn $2.20 a share on sales of $26.24 billion. On a year-over-year basis, TSMC earnings increased 53% while sales rose 36%.
For the current quarter, TSMC expects revenue of $25 billion to $25.8 billion. The midpoint of $25.4 billion topped Wall Street’s target of $24.92 billion. In the first quarter last year, it posted sales of $18.32 billion.
TSMC’s customers include top fabless semiconductor firms such as Apple (AAPL), AMD (AMD), Broadcom (AVGO), Nvidia (NVDA) and Qualcomm (QCOM).
“Our business in the fourth quarter was supported by strong demand for our industry-leading 3-nanometer and 5-nanometer technologies,” Chief Financial Officer Wendell Huang said in a news release. “Moving into first quarter 2025, we expect our business to be impacted by smartphone seasonality, partially offset by continued growth in AI-related demand.”
TSMC also guided to 2025 revenue growth in the mid-20s percentage range. The consensus estimate of analysts had been for sales growth of 22% this year.
TSM Stock Pops After Report
In afternoon trades on the stock market today, TSM stock jumped 4.9% to 216.92.
On Dec. 23, TSM stock broke out of a cup-with-handle base at a buy point of 205.63, according to IBD MarketSurge charts.
Since then, the stock has weaved in and out of the 5% buy zone of its breakout. But bullishly, TSM stock has stayed out of the 7%-to-8% stop-loss sell zone and above its 50-day moving average line, a key support level.
Makers of semiconductor equipment rose Thursday after TSMC said it expects its 2025 capital budget to be between $38 billion and $42 billion. That compares with slightly less than $30 billion in 2024.
ASML (ASML), Applied Materials (AMAT), KLA (KLAC) and Lam Research (LRCX) advanced on the news.
Advanced Chips Drive Results
In the fourth quarter, shipments of 3-nanometer chips accounted for 26% of TSMC’s total wafer revenue; 5-nanometer accounted for 34%; and 7-nanometer made up 14%. Advanced technologies, defined as 7-nanometer and smaller nodes, accounted for 74% of total wafer revenue.
Circuit widths on chips are measured in nanometers, which are one-billionth of a meter.
Bernstein Research analyst Mark Li reiterated his outperform rating on TSM stock with a price target of 258.
“Despite recent concerns, TSMC guided AI revenue to double this year, and reaffirmed AI demand exceeds capacity,” Li said in a client note.
TSM Stock Gets Price-Target Hikes
CFRA Research analyst Hazim Bahari kept his buy rating on TSM stock and lifted his 12-month price target to 240 from 219.
“The strong quarter was underpinned by robust demand for leading-edge capacities (above 100% utilization rates for N3 and N5, collectively 60% revenue mix), N3 yield improvement, and solid wafer ASP (average selling price) gains (+20% year over year), which lifted OP (operating profit) margin to the highest in eight quarters at 49%,” he said in a client note.
Cowen analyst Krish Sankar reiterated his hold rating on TSM stock but upped his price target to 215 from 200.
“Robust 3/5/7 nm demand (74% of wafer sales) drove the beat and raise with AI accelerator demand set to double in calendar 2025,” Sankar said in a client note. “AI not a catalyst for PC/mobile demand yet.”
TSM stock is on three IBD stock lists: IBD 50, Global Leaders and Tech Leaders.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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