Will TSM's earnings momentum continue in 2025?

TSM's earnings momentum is likely to continue in 2025, driven by several key factors:

1. Growth in AI and Advanced Technology Nodes: TSMC's revenue has shifted significantly towards more advanced technology nodes, with 75% now coming from N7 (7-nanometer) or more advanced processes. The growth in AI and advanced technology nodes is expected to fuel revenue growth in 2025 and beyond.
2. Strong Demand for Semiconductor Products: The demand for semiconductor products, particularly in the AI and CPU sectors, is expected to remain strong. TSMC's leading position in these markets positions it well for continued growth.
3. Capacity Expansion and Price Increase Potential: TSMC is budgeting capital spending at $38 billion-$42 billion for 2025, which is a 28%-41% jump from 2024's $29.8 billion. This significant increase in capital spending indicates confidence in future growth and suggests that TSMC may have the capacity to increase prices, which could lead to higher gross margins in 2025.
4. Favorable Market Landscape: TSMC's competitors, such as Samsung Electronics and Intel, are moving to more advanced nodes, which could create a more favorable landscape for TSMC in terms of market share and pricing power.
5. Strategic Investments and Expansion Plans: TSMC's investment in the United States is expected to expand its presence in the country and strengthen its supply chain. This strategic investment could lead to new business opportunities and growth in 2025.
6. Upbeat Guidance and Analyst Confidence: Analysts have raised their price targets and given positive ratings to TSMC, reflecting confidence in its growth prospects. The company's guidance for revenue growth in the mid-20s in 2025 and an average 20% growth over the next few years suggests a positive outlook.

In conclusion, TSMC's earnings momentum is expected to continue in 2025 due to strong demand for its products, capacity expansion, strategic investments, and favorable market conditions.