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TSM's Q2 net income jumped 60.7% to NT$398.27B, with sales up 38.7% to NT$933.80B on strong AI chip demand.
TSM expects Q3 revenues of $31.8B-$33.0B, up 38% YoY, and sees 2025 revenues growing nearly 30% in USD terms.
TSM holds 67% of chip manufacturing and benefits from high entry barriers and reliance by major tech clients.
Taiwan Semiconductor Manufacturing Company Limited (TSM - Free Report) , or TSMC, recently reported a record surge in second-quarter profit as it continues to benefit from the artificial intelligence (AI) megatrend. TSMC is also expected to grow further for three main reasons. Let’s examine those reasons and what makes TSMC stock a compelling buy now.
TSMC’s Positive Q2 Results & Outlook Boosts Share Price
On Thursday, TSMC reported that its net income surged 60.7% year over year to NT$398.27 billion in the second quarter, a record high and significantly higher than estimates. TSMC’s revenues for the June quarter came in at NT$933.80 billion, up 38.7% year on year, and above projections.
TSMC’s second-quarter sales rose as demand for AI chips remained strong. The company’s high-performance computing division, which includes AI and 5G applications, accounted for 60% of the second-quarter revenues. Strong demand for TSMC’s progressive 3nm and 5nm node semiconductor chips also contributed to revenue growth.
Banking on the growing demand for TSMC’s advanced processors for clients, including NVIDIA Corporation (NVDA - Free Report) and Apple Inc. (AAPL - Free Report) , the company projected third-quarter revenues between $31.8 billion and $33.0 billion, up 38% year over year. For 2025, TSMC expects revenues to surge nearly 30% when measured in U.S. dollar terms.
After the recent positive quarterly results and an optimistic forecast, TSMC stock popped. TSMC’s shares have outperformed the Semiconductor - Circuit Foundry industry year to date (+24.2% vs. 20.3%).
Image Source: Zacks Investment Research
3 More Reasons to Be Bullish on TSMC Stock
TSMC holds a leading position in the semiconductor industry. It controls nearly 67% of semiconductor manufacturing, giving it significant pricing power. Being the first to introduce the third-party foundry model also grants TSMC dominance in the chip foundry sector. Regarding dominance, all major players in the industry, such as NVIDIA, Advanced Micro Devices, Inc. (AMD - Free Report) , and Broadcom Inc. (AVGO - Free Report) , are the key customers of TSMC. Conversely, TSMC’s competitor, Intel Corporation (INTC - Free Report) , has faced recent difficulties.
TSMC also faces headwinds from President Donald Trump’s tariffs. Taiwan is subject to 32% tariffs, with Trump warning of further tariffs on semiconductors. U.S. export controls also restrict TSMC’s business with China. However, recently, NVIDIA and AMD received assurance from the U.S. government to ship products to China, which is a positive development for TSMC as well. Additionally, TSMC is expanding beyond Taiwan, with plans to establish manufacturing plants in Japan, Germany and the United States soon.
Manufacturing a semiconductor plant is not easy; it involves a complex and cumbersome process. The technology is not only intricate but also requires significant capital investment. As a result, many advanced companies have chosen not to build their facilities and instead rely on TSMC. This high barrier to entry has helped TSMC keep potential rivals at bay.
TSMC Stock to Buy Hand Over Fist
While encouraging second-quarter results boosted TSMC’s stock price, the company is primed for growth in the years ahead due to its competitive advantages, expansion efforts and significant barriers to entry in the semiconductor industry, where it already holds a dominant position.
Brokers are also optimistic about the company’s prospects. They predict TSMC stock’s average short-term price target at $244.75, reflecting a 3% increase from the last closing price of $237.56. The highest target stands at $270, suggesting a potential upside of 13.7%.
Image: Shutterstock
3 Reasons to Buy TSMC Stock Besides 61% Q2 Profit Surge
Key Takeaways
Taiwan Semiconductor Manufacturing Company Limited (TSM - Free Report) , or TSMC, recently reported a record surge in second-quarter profit as it continues to benefit from the artificial intelligence (AI) megatrend. TSMC is also expected to grow further for three main reasons. Let’s examine those reasons and what makes TSMC stock a compelling buy now.
TSMC’s Positive Q2 Results & Outlook Boosts Share Price
On Thursday, TSMC reported that its net income surged 60.7% year over year to NT$398.27 billion in the second quarter, a record high and significantly higher than estimates. TSMC’s revenues for the June quarter came in at NT$933.80 billion, up 38.7% year on year, and above projections.
TSMC’s second-quarter sales rose as demand for AI chips remained strong. The company’s high-performance computing division, which includes AI and 5G applications, accounted for 60% of the second-quarter revenues. Strong demand for TSMC’s progressive 3nm and 5nm node semiconductor chips also contributed to revenue growth.
Banking on the growing demand for TSMC’s advanced processors for clients, including NVIDIA Corporation (NVDA - Free Report) and Apple Inc. (AAPL - Free Report) , the company projected third-quarter revenues between $31.8 billion and $33.0 billion, up 38% year over year. For 2025, TSMC expects revenues to surge nearly 30% when measured in U.S. dollar terms.
After the recent positive quarterly results and an optimistic forecast, TSMC stock popped. TSMC’s shares have outperformed the Semiconductor - Circuit Foundry industry year to date (+24.2% vs. 20.3%).
Image Source: Zacks Investment Research
3 More Reasons to Be Bullish on TSMC Stock
TSMC holds a leading position in the semiconductor industry. It controls nearly 67% of semiconductor manufacturing, giving it significant pricing power. Being the first to introduce the third-party foundry model also grants TSMC dominance in the chip foundry sector. Regarding dominance, all major players in the industry, such as NVIDIA, Advanced Micro Devices, Inc. (AMD - Free Report) , and Broadcom Inc. (AVGO - Free Report) , are the key customers of TSMC. Conversely, TSMC’s competitor, Intel Corporation (INTC - Free Report) , has faced recent difficulties.
TSMC also faces headwinds from President Donald Trump’s tariffs. Taiwan is subject to 32% tariffs, with Trump warning of further tariffs on semiconductors. U.S. export controls also restrict TSMC’s business with China. However, recently, NVIDIA and AMD received assurance from the U.S. government to ship products to China, which is a positive development for TSMC as well. Additionally, TSMC is expanding beyond Taiwan, with plans to establish manufacturing plants in Japan, Germany and the United States soon.
Manufacturing a semiconductor plant is not easy; it involves a complex and cumbersome process. The technology is not only intricate but also requires significant capital investment. As a result, many advanced companies have chosen not to build their facilities and instead rely on TSMC. This high barrier to entry has helped TSMC keep potential rivals at bay.
TSMC Stock to Buy Hand Over Fist
While encouraging second-quarter results boosted TSMC’s stock price, the company is primed for growth in the years ahead due to its competitive advantages, expansion efforts and significant barriers to entry in the semiconductor industry, where it already holds a dominant position.
Brokers are also optimistic about the company’s prospects. They predict TSMC stock’s average short-term price target at $244.75, reflecting a 3% increase from the last closing price of $237.56. The highest target stands at $270, suggesting a potential upside of 13.7%.
Image Source: Zacks Investment Research
Additionally, the $9.54 Zacks Consensus Estimate for TSMC’s earnings per share has increased 15.5% annually. TSMC, therefore, rightfully holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Image Source: Zacks Investment Research