Financial Performance - TSMC views currency volatility as a significant uncertainty affecting its margins [1] Risk Management - TSMC will continuously evaluate hedging strategies to mitigate the impact of currency volatility [1]

>> I BELIEVE IT MAKES SENSE TO CUT THE M -- FMOC POLICY RATE. AND LOOKING LATER TO THE YEAR IF AS I EXPECT UNDERLYING INFLATION REMAINS IN CHECK, WITH HEADLINE INFLATION REPORTED MODEST BUT TEMPORARY INCREASES FROM TARIFFS THAT ARE NOT AN ANCHORING INFLATION EXPECTATIONS AND THE CAN -- ECONOMY CONTINUES TO GROW SLOWLY, I WOULD SUPPORT FURTHER 25 BASIS POINT CUTS TO MOVE POLICY TOWARD NEUTRAL. >> THIS SUMMARY OF ECONOMIC POSITIONS WE PUT OUT HAVE TWO RATE CUTS AND I THINK THAT IS OF REASONABLE OUTLOOK TO HAV ...

Core Viewpoint - TSMC's Chief Financial Officer, Huang Ren-Chao, indicated that due to uncertainties related to tariffs, the company plans to adopt a cautious approach towards capital expenditures [1] Group 1 - TSMC is facing uncertainties regarding tariffs, which is influencing its financial strategy [1] - The company intends to maintain a conservative stance on capital spending in response to these uncertainties [1]

Group 1: Hong Kong Stocks - Oriental Selection (01797) surged over 14% with the upcoming launch of a second sanitary napkin product, indicating growth potential in self-operated products [1] - AI application stocks rose in early trading, with Kingsoft Cloud (03896) and Innovation Works (02121) both up over 11%, and other companies like Kintor Pharmaceutical (01860) and Kingdee International (00268) also showing gains [1] - Yao Cai Securities (01428) increased over 8% as Ant Group actively develops stablecoins in Hong Kong, enhancing the prospects for Yao Cai's virtual asset business [1] - Meitu (01357) saw a rise of over 7% during trading, with institutions optimistic about the company's performance potential due to AI Agent product validation [1] - Jinli Permanent Magnet (06680) initially rose over 8%, with a projected net profit increase of up to 180% year-on-year for the first half of the year, as institutions reassess the value of rare earth strategic metals [1] - NIO-SW (09866) increased over 4% as the pre-sale price of the L90 model exceeded expectations, with Morgan Stanley forecasting monthly sales to surpass 5,000 units [1] - Guoquan (02517) rose over 11% following an earnings forecast, expecting a net profit of approximately 180 million to 210 million yuan for the first half of the year, a year-on-year increase of about 111%-146% [1][2] Group 2: US Stocks - PepsiCo (PEP.US) rose 7.45% after Q2 earnings exceeded expectations, with EPS at $2.12, surpassing the forecast of $2.03, and revenue growing 1.0% year-on-year to $22.73 billion [3] - Lucid (LCID.US) soared 36.24% as it announced a partnership with Uber to launch a self-driving taxi fleet [3] - Abbott (ABT.US) fell over 8% due to Q3 guidance falling short of expectations and a downward revision of the annual profit forecast [3] - AI application software stocks saw gains, with Unity Software (U.US) rising over 12% at one point, and other companies like SoundHound AI (SOUN.US) and AppLovin (APP.US) also increasing [3] - Taiwan Semiconductor Manufacturing Company (TSM.US) rose 3.38%, achieving a record high with Q2 EPS of $2.47, exceeding the forecast of $2.39, and revenue growing 44.4% year-on-year to $30.07 billion [4] - Oracle (ORCL.US) increased 3.09%, reaching a new high as it announced a $3 billion investment in AI and cloud infrastructure in Germany and the Netherlands over the next five years [4] - BigBear.ai Holdings (BBAI.US) rose 15.45% ahead of its earnings report, with expectations of a loss of $0.07 per share but revenue projected to reach $40.99 million, a year-on-year increase of 3.04% [4] Group 3: Drone and Streaming Stocks - Drone-related stocks strengthened, with Palladyne AI (PDYN.US) rising 31.4% and Joby Aviation (JOBY.US) increasing 8.51% amid U.S. Department of Commerce investigations into drone systems and key solar materials [5] - Netflix (NFLX.US) saw a slight decline of over 2% after reporting Q2 revenue of $11.079 billion, slightly above the forecast, but underperformed in the APAC and LATAM regions [5]

Capital Expenditure Strategy - TSMC plans to adopt a cautious approach to capital expenditure [1] - The cautious approach is due to tariff-related uncertainties [1] Financial Leadership - CFO Wendell Huang provided the information regarding TSMC's capital expenditure strategy [1]

| 42 | | 三七互娱 | 51.18 | | | --- | --- | --- | --- | --- | | 43 | | 新大陆 | 46.33 | | | 44 | | 岩山科技 | 44.76 | | | 45 | | 中国民航信息网络 | 44.44 | | | 46 | INESA | 云赛智联 | 42.99 | | | 47 | | 阅文集团 | 42.47 | 3 1 | | 48 | | 东华软件 | 42.26 | -1 | | 49 | | 金山云 | 41.49 | -1 | | 50 | | 银之杰 | 41.44 | -1 + | | 8 | | 中芯国际 | 474.12 | 11 | | --- | --- | --- | --- | --- | | 9 | | 京东 | 471.23 | 1 t | | 10 | | 快手-W | 383.82 | 1 t | | II | | 腾讯音乐 | 346.34 | 1 t | | 12 | | 理想汽车 | 335.69 | 1 t | | 13 | Bal & En | 百度 | 300.83 | 11 | | 14 ...

Core Viewpoint - TSMC reported record quarterly profits exceeding market expectations but warned of potential negative impacts on future revenue due to U.S. tariffs, which may not manifest until the fourth quarter [1] Group 1: Financial Performance - TSMC's revenue for Q2 was NT$933.79 billion (approximately RMB 228.2 billion), a year-on-year increase of 38.6% [1] - Net profit reached NT$398.3 billion (approximately RMB 97.1 billion), marking a historical high with a year-on-year growth of 60.7%, achieving double-digit growth for the fifth consecutive quarter [1] - For Q3, TSMC expects sales to rise again, with annual revenue projected to grow approximately 30% in USD terms, up from a previous forecast of "close to 25%" [2] Group 2: Production and Investment - In Q2, TSMC's revenue breakdown by process technology showed 24% from 3nm, 36% from 5nm, 14% from 7nm, and 7% from 16/20nm and 28nm [2] - TSMC plans to invest between $38 billion and $42 billion in capital expenditures this year, with a similar range set for 2025, which will include the construction or equipping of nine advanced factories [2][3] Group 3: Market Dynamics and Client Impact - TSMC's president noted that the approval for NVIDIA to resume sales of H20 AI chips to China is a positive development for both TSMC and its clients [1] - Concerns were raised regarding potential impacts on TSMC's earnings if major client Apple experiences disappointing sales, particularly in China [4] - The appreciation of the New Taiwan Dollar against the U.S. Dollar (approximately 12% year-to-date) is expected to weaken profit margins, with Q3 gross margin projected to decline from 58.6% in Q2 to between 55.5% and 57.5% [2]

Group 1: Company Overview - TSMC's management has raised its full-year revenue growth guidance from approximately 25% to 30% year-on-year, indicating strong resilience in gross margin at 58.6%, surpassing previous expectations [1][2] - The company anticipates that the demand for AI chips will increase due to the U.S. government's relaxation of export restrictions, which is expected to drive the demand for advanced process technologies [2] - TSMC plans to ramp up production of its 2nm process technology in the second half of 2025, with expectations that the volume of 2nm wafers will exceed that of 3nm and 5nm wafers during the same period [2] Group 2: Financial Projections - The target price for TSMC has been raised to $280, reflecting a potential upside of 17.9% from the closing price of $237.56, based on a 26x average P/E ratio for 2025/26 [1][2] - Adjustments to earnings per share (EPS) estimates have been made, with new projections set at 59.5 and 65.5 New Taiwan Dollars, down from previous estimates of 60.8 and 69.6 New Taiwan Dollars [2] Group 3: Market Context - The report highlights that the recovery in consumer electronics is expected to be moderate due to trade uncertainties, but the high demand for AI is likely to sustain TSMC's pricing for 3nm and 5nm technologies [2] - The global semiconductor market is projected to see 30% of its capacity in processes below 2nm being produced in the U.S. in the long term [2]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of $300 [7][24]. Core Insights - The company reported Q2 2025 revenue of $30.07 billion, exceeding guidance due to strong demand for 3nm and 5nm processes, with a gross margin of 58.6% [1][12]. - The company raised its 2025 revenue growth guidance to approximately 30%, up from nearly 25% previously, and expects capital expenditures to remain between $38 billion and $42 billion [1][14]. - The report highlights the ongoing strong demand for AI and HPC, with HPC revenue increasing by 14% quarter-over-quarter, now accounting for 60% of total revenue [2][12]. Revenue and Profitability - The company expects Q3 2025 revenue to be between $31.8 billion and $33.0 billion, with a gross margin forecast of 55.5% to 57.5% [1][14]. - The revenue forecast for 2025-2027 has been adjusted upward by 1.9%, 1.7%, and 1.1% respectively, while net profit estimates have been adjusted to NT$1,528 billion, NT$1,820 billion, and NT$2,156 billion [5][24]. Capacity and Technology - The company maintains its capital expenditure budget for 2025 at $38 billion to $42 billion, with ongoing production plans for N2 and A16 processes [4][30]. - The report emphasizes the tight supply-demand balance for N3 and N5 nodes, with expectations for increased AI product transitions to N3 in the coming years [31]. Market Position and Valuation - The company is positioned as a leader in semiconductor foundry services, with a projected PE ratio of 25x for 2026, compared to a median of 21x for comparable companies [5][26]. - The target price of $300 reflects a significant increase from the previous target of $227.98, based on the anticipated growth in earnings per share [24][26].

Core Viewpoint - Citi analysts have raised TSMC's target price, citing its technological advantages that will help maintain long-term structural growth [1] Group 1: Company Performance - TSMC is expected to maintain long-term structural growth due to its leading chip and advanced packaging technologies [1] - The company plans to mass-produce 2nm chips in the second half of the year, which will require high manufacturing complexity and precise 3D process control [1] - TSMC's accumulated expertise in process control is identified as one of its core competitive advantages, supporting its value realization [1] Group 2: Financial Projections - Citi forecasts that TSMC's average selling price will show an upward trend due to the technological iteration process and TSMC's leading position [1] - Revenue growth is projected at 15% for 2026 and 24% for 2027 [1] - Citi maintains a buy rating for TSMC and has raised its target price from 1280 NTD to 1400 NTD [1]