Key Takeaways TSM has gained 17.5% YTD, outperforming peers and the broader Computer and Technology sector.AI-driven demand boosted TSM's Q2 revenues by 44% and EPS by 61%, with 3nm and 5nm chips driving growth.TSM plans up to $42B in 2025 capex, focusing 70% on advanced nodes to meet surging AI chip demand.Taiwan Semiconductor Manufacturing Company (TSM) , also known as TSMC, has made a remarkable run so far this year despite high market volatility amid ongoing macroeconomic uncertainties and geopolitical ...

Key Takeaways TSM's Q2 revenues rose 39%, with profits up 61%, fueled by demand for 3nm and 5nm AI chips. NVDA sees strong AI chip demand but faces $8B in estimated losses from China chip restrictions in Q2 FY26. TSM raised its FY25 revenue growth outlook to 30% and plans to invest up to $42B in advanced production.NVIDIA Corporation (NVDA) and Taiwan Semiconductor Manufacturing Company (TSM) , also known as TSMC, are two of the most important companies in the global AI chip supply chain. NVIDIA designs t ...

Investment Rating - The report maintains a "Buy" rating for TSMC, with an "Overweight" (OW) stance, suggesting accumulation ahead of the earnings print due to low expectations [1][6]. Core Insights - TSMC's preliminary revenue for 2Q25 was NT$933 billion, reflecting an 11% quarter-over-quarter (Q/Q) increase in TWD, translating to approximately US$29.6 billion, which is a 16% Q/Q increase in USD, exceeding both the company's guidance and Morgan Stanley's estimates [2][3]. - The likelihood of TSMC raising its full-year revenue guidance has increased, with expectations of a 27% year-over-year (Y/Y) growth in USD, driven by strong AI demand and tight leading-edge capacity [3][13]. - The report highlights that TSMC's fab utilization in the second half of 2025 remains robust despite lukewarm demand in smartphones and PCs, indicating a potential shift in demand dynamics [3][13]. Revenue and Earnings Guidance - TSMC is expected to raise its 2025 full-year revenue guidance from mid-20% to high-20% due to strong AI demand, with 3Q25 revenue projected to increase by 1% Q/Q in USD [17][18]. - The report forecasts a gross margin decline to 55.6% in 3Q25, with TWD revenue potentially decreasing by nearly 4% Q/Q due to TWD appreciation [15][17]. - The preliminary EPS estimate for 2Q25 is NT$14.40, with a gross margin around 57% [17]. Price Target and Valuation - The price target for TSMC remains NT$1,288, implying a 17% upside from the current share price of NT$1,100 [6][56]. - TSMC is trading at 17x the estimated EPS for 2026, which is considered attractive, with expectations of a re-rating to 20x due to increased bargaining power and sustainable AI demand [18][56]. Market Dynamics and Demand Drivers - The report notes that TSMC's wafer pricing strategy may be influenced by FX impacts, with expectations of a 3-5% price hike in 2026 due to strong demand and TWD appreciation [26][30]. - AI demand is projected to significantly contribute to TSMC's revenue, with expectations that cloud AI revenue will grow from 13% in 2024 to 34% by 2027 [37][40]. Semiconductor Tariffs and Regulatory Environment - The report discusses the potential for TSMC to receive an exemption from semiconductor tariffs due to its significant investment in US production, which could mitigate revenue risks associated with such tariffs [4][25].

Core Viewpoint - Taiwan Semiconductor Manufacturing Company (TSMC) is a crucial player in the AI chip manufacturing space, serving as a reliable partner for AI chipmakers despite not designing chips itself [1][7]. Group 1: TSMC's Market Position - TSMC is recognized as the world's most advanced semiconductor foundry, with major clients including Nvidia, AMD, Broadcom, and Apple, giving it unmatched scale and technological leadership [2]. - The company has a significant market share lead in the advanced node market, outperforming competitors like Intel and Samsung [2]. Group 2: Revenue and Growth - In Q1, TSMC's revenue increased by 35% to $25.5 billion, driven by high-performance computing (HPC) growth, and preliminary Q2 revenue is estimated to have risen by 39% to $31.9 billion [4]. - Chips manufactured on 7nm and smaller nodes accounted for 73% of TSMC's revenue in Q1, up from 65% the previous year, with 3nm nodes contributing 22% [3]. Group 3: Pricing Power and Margins - TSMC's strong pricing power is evident as it raises prices to counteract margin dilution from new fabs, with gross margin rising by 190 basis points to 58.8% in Q1 [4][5]. - The company plans to increase AI chip prices, with Arizona-made chips potentially commanding a 30% premium [5]. Group 4: Future Growth Prospects - TSMC anticipates AI-related revenue to grow at a mid-40% compounded average growth rate (CAGR) over the next five years starting in 2024 [8]. - The company is also positioned to benefit from the growth of autonomous driving and robotaxis, which will require advanced chips [9]. Group 5: Investment Appeal - TSMC is viewed as a safe investment in the AI semiconductor space, as it provides manufacturing services to all major players without needing to bet on a single chipmaker [11]. - The stock is attractively valued, trading at a forward P/E ratio of 24 based on 2025 estimates and a PEG ratio of less than 0.7, indicating it is undervalued [12].

Core Insights - The AI revolution is benefiting not only major tech companies like Microsoft and Nvidia but also semiconductor firms such as Taiwan Semiconductor Manufacturing Company (TSMC) and Innodata [1] Group 1: Taiwan Semiconductor Manufacturing Company (TSMC) - TSMC is the largest contract chipmaker globally, holding approximately 90% of the market share and collaborating with major companies like Nvidia, AMD, Broadcom, and Qualcomm [4] - The company has experienced a growth of +264.15% over the past five years, with its pure-play foundry market share projected to reach 66% by the end of 2025, driven by demand for 3nm and 5nm chips [5] - TSMC's sales increased by 42% last month, with its products being utilized in data centers, smartphones, and electric vehicles, and predictions suggest a potential stock increase of +30.89% in the next year [6] Group 2: Innodata - Innodata specializes in data engineering services and provides annotated data essential for training AI models across technology, finance, and healthcare sectors [9] - The company has established partnerships with five of the "Magnificent Seven," leading to a revenue surge of 96%, and the rise of specialized large language models presents further opportunities [10] - Estimates indicate that Innodata's stock could see an increase of +121.30% in the next 12 months [10] Group 3: Industry Outlook - Both TSMC and Innodata are positioned to become increasingly integral to the AI ecosystem, with TSMC manufacturing advanced chips and Innodata supplying necessary data for training new language models [11]

Core Viewpoint - Taiwan Semiconductor (TSMC) is expected to outperform the market significantly over the next five years, with an estimated 129% gain driven by strong management insights and technological advancements [2][6][13] Company Overview - TSMC is the world's largest chip foundry, serving major tech companies like Apple and Nvidia, which rely on TSMC for manufacturing their chips [4] - The company is recognized for its cutting-edge technology, currently producing 3nm chips and working towards 2nm and 1.6nm chips [5] Growth Projections - TSMC's management anticipates AI-related revenue to grow at a 45% compound annual growth rate (CAGR), with overall revenue expected to approach a 20% CAGR [6] - By the end of 2024, TSMC's revenue is projected to reach $90.1 billion, potentially rising to $206 billion with an 18% growth rate [6][7] Investment and Production Strategy - TSMC has announced a $100 billion investment to enhance manufacturing capabilities in the U.S., which is expected to secure its position as a sole source supplier for many clients [8][9] - This investment will not immediately impact TSMC's income statement, as expenses will be recognized through depreciation over time [10] Profitability and Valuation - While TSMC's profit margins may experience a temporary dip due to increased operating expenses from hiring staff, margins are expected to return to current levels by the end of the five-year period [11] - TSMC's stock is trading at its five-year average price-to-earnings (P/E) level, indicating it is not overpriced and future growth is likely to stem from demand rather than earnings expansion [11][13]