Taiwan Semi August revenues grow 33% YoY, signaling continued demand in the chip space

Taiwan Semiconductor Manufacturing Company (TSMC) reported strong August 2024 revenue figures, showing a 33% year-over-year (YoY) increase to NT$250.87 billion (approximately $7.72 billion). This represents the second-highest monthly revenue in the company’s history, though it did mark a sequential decline of 2.4% from the record NT$256.95 billion in July. Despite this minor decline from July, the YoY growth signals robust demand in key sectors like high-performance computing and artificial intelligence (AI) chips, driven by leading customers such as Nvidia and Apple.

Year-to-date (YTD) performance through August further highlights the company’s growth trajectory, with revenue totaling NT$1.77 trillion, up 30.8% compared to the same period in 2023. Analysts are optimistic that TSMC’s third-quarter revenue could exceed the high end of its guidance (between $22.4 billion and $23.2 billion), spurred by strong demand for advanced nodes like N3 and N5, which are essential for AI applications and smartphone processors. JPMorgan pointed out that September’s revenues could either remain flat or show slight growth, depending on the ramp-up of production for Apple's latest iPhones.

The strong YoY growth indicates continued resilience despite global economic uncertainties, particularly in the smartphone and AI markets. Analysts from Bernstein noted that while monthly sales are becoming less predictive of quarterly performance, the current momentum positions the company ahead of third-quarter consensus expectations.

A key factor contributing to TSMC's strong performance is its leadership in high-performance computing and AI chips, which now account for over 50% of the company’s revenue. The company's partnership with Nvidia, the leading manufacturer of AI chips, continues to be a significant driver of growth. Additionally, TSMC remains the main supplier of Apple’s central processors, reinforcing its dominance in the semiconductor space. As AI demand continues to rise, TSMC is expanding its capacity to meet future demand, including doubling its advanced chip packaging capabilities by the end of 2024.

While the company’s American depositary receipts (ADRs) declined by 2.2% following the revenue announcement, this was largely attributed to broader market trends, with chip stocks facing increased volatility after significant gains fueled by AI-related excitement over the past year. Despite the stock’s recent decline, analysts remain bullish on TSMC's long-term prospects, expecting continued growth due to its technological leadership and strong position in key markets like AI and mobile devices.

Overall, TSMC’s August revenue figures reaffirm its market dominance and strategic importance in the global semiconductor industry. The company’s ability to sustain impressive YoY growth, driven by demand for advanced chips, positions it well for future growth, particularly as the AI revolution continues to unfold. Looking ahead, analysts anticipate TSMC to maintain strong momentum into 2025, even with potential challenges such as competition from Intel and possible shifts in outsourcing strategies.