TSMC’s U.S. Stock Plummets Amid Record Quarterly Results and Earnings Caveats

TLDR

• TSMC’s U.S.-listed stock (TSM) experienced a 3.1% decline in overnight trading, following a period of reaching record highs before its earnings announcement.
• The company reported Q1 revenue of NT$1.134 trillion, an 8% increase, with a gross margin of 66.2%, surpassing its own guidance of 63–65%.
• Earnings per share (EPS) stood at NT$22.08, exceeding analyst estimates by 7%.
• TSMC issued a warning regarding potential long-term supply disruptions for helium and bromine due to the ongoing conflict in the Middle East.
• Needham analyst firm increased its price target for TSM to $480 from $410, reiterating a Buy rating.

(SeaPRwire) –   Taiwan Semiconductor Manufacturing (TSM) saw its stock drop 3.1% in U.S. trading on Thursday and an additional 2.4% in Taipei on Friday. This dip occurred as investors opted to secure profits after a significant rally leading up to the company’s earnings report.

Taiwan Semiconductor Manufacturing Company Limited, TSM

The stock had previously reached a record high of T$2,101.46 in Taipei earlier in the week before experiencing a pullback.

TSMC announced record profits for the first quarter, with revenue growing 8% quarter-over-quarter to NT$1.134 trillion. The company’s gross margin was reported at 66.2%, exceeding its own projected range of 63–65%.

Earnings per share were reported at NT$22.08, which was 7% higher than what analysts had estimated.

Looking ahead to the second quarter, management anticipates an 11% increase in revenue compared to the previous quarter. This projection is significantly higher than the typical seasonal growth of approximately 6% and surpasses analyst expectations of 7–8%.

The company attributed this strong performance to sustained high demand from the artificial intelligence (AI) sector, particularly for advanced chips utilized in data centers.

Supply Chain Warning

Despite the robust financial results, TSMC highlighted a potential risk concerning supply chain disruptions for specialized materials, specifically helium and bromine. These disruptions are linked to the ongoing conflict involving the U.S. and Iran in the Middle East.

The conflict has impacted the flow of materials from the Middle East to Asia, and attacks on regional facilities have led to temporary production halts.

TSMC stated that it has secured alternative chemical sources for the immediate future, but the long-term supply situation remains uncertain.

Capacity Questions

During the earnings call, analysts questioned CEO C.C. Wei about the possibility of capacity constraints leading customers to seek out rival chip manufacturers.

Wei responded by emphasizing that establishing independent chipmaking infrastructure on the scale of TSMC would require a minimum of three years and substantial capital investment.

Earlier reports this year indicated that Nvidia might face delays with its next-generation Vera Rubin AI chips due to TSMC’s capacity limitations.

TSMC announced plans to increase its capital expenditures in the coming quarters to accommodate the growing demand.

Regarding valuation, Needham raised its price target for TSM to $480 from $410 following the earnings release, maintaining a Buy rating.

GuruFocus estimates TSMC’s intrinsic value at $261.00, placing the stock approximately 39% above this level at its current price of $363.35.

The company’s price-to-earnings (P/E) ratio is currently 34x, compared to its five-year median of 22.55x.

Insider activity over the past three months shows purchases totaling $819,595 with no recorded sales.