Taiwan Semiconductor sales tops Wall Street estimates improving chip sector sentiments 📈

Taiwan Semiconductor Manufacturing's (TSM.US) US-listed ADRs gained nearly 1% after the company reported monthly (thus ending the quarter) sales estimates far above forecasts, citing strong demand for its AI products. Monthly sales rose 39.6% year over year, improving sentiments across the semiconductor industry as investors see strong TSMC results as a proof of resilient AI infrastructure demand. The company will report detailed quarterly financial results for the third quarter next Thursday, October 17. 

• The results were supported by strong orders from Apple, MediaTek and Qualcomm (N3E). The company intends to introduce a special 'chips on wafer on substrate' CoWoS method, which is expected to further distance it from competing semiconductor 'foundries'.  
• The market's main focus next week will be on whether the company expects to beat forecasts of 7% quarterly profit growth, in the fourth quarter of the year. Strong orders from Nvidia and Intel are easing concerns about potentially lower orders of Apple's A18, which will be assembled in the iPhone 16s.

The table below shows TSMC's monthly sales, sorted by year. The third quarter brought the company a total of NT$757 billion in Taiwanese sales (about $23.6 billion), averaging a 39% annual growth rate; the market was expecting NT$748 billion. Quarterly growth was 13%, while the company itself, in Q2, expected growth of 8% to a maximum of 12%.

Source: TSMC

The company expects further improvement in operating and gross margins in the third quarter of the year, as well as revenue growth. TSMC also estimates that Q4 sales will increase by another 9 to 10% quarter-on-quarter (despite a great Q3).

Source: TSMC

TSMC stock (TSM.US, D1 interval)

Since the August meltdown, TSMC shares have risen nearly 40% from the vicinity of $130 to nearly $190 per share. Strong sales results are making investors more confident that spending on AI infrastructure won't slow down after all, and keeping the upward trend going.

Source: xStation5Source: XTB Reserach, Bloomberg Finance L.P.

Source: XTB Reserach, Bloomberg Finance L.P.