TSMC's second-quarter earnings surpass predictions due to the ongoing growth of AI chips.

• Nearly 70% increase in TSMC's Taiwan-listed shares this year is due to rising demand for advanced chips used in AI applications.
• The demand for generative AI is increasing in the cloud and at the edge. TSMC's N3 process has high yield rates and efficient production lines, according to Brady Wang, associate director of Counterpoint Research, who made the statement on Friday before the results.

In the second quarter, revenue and profit expectations were exceeded by on Thursday, as the demand for advanced chips used in AI applications continues to increase.

Here are TSMC's second-quarter results versus LSEG consensus estimates:

• NT$673.51 billion vs. NT$657.58 billion expected
• Net income: NT$247.85 billion, vs. NT$238.8 billion expected

TSMC reported a 40.1% increase in net revenue from the previous year to NT$673.51 billion, with net income also rising by 36.3% to NT$247.85 billion. TSMC forecasts its second-quarter revenue to be between $19.6 billion and $20.4 billion.

Nearly 70% increase in TSMC's Taiwan-listed shares this year is due to rising demand for advanced chips used in AI applications.

TSMC is the world's leading manufacturer of advanced chips used in various devices, including smartphones and AI applications. Despite competition from rivals such as Samsung and Intel, TSMC remains dominant, with clients like Apple and Microsoft.

Currently, the chip giant produces 3-nanometer chips and plans to start mass production of 2-nanometer chips in 2025. Generally, a smaller nanometer size results in more powerful and efficient chips.

The demand for generative AI is increasing in the cloud and at the edge. TSMC's N3 process has high yield rates and efficient production lines. The market is well-funded, and regional political factors are driving the demand for advanced processes, according to Brady Wang, associate director of Counterpoint Research, who spoke on Friday before the results.

In 2024, the capacity of the 3-nanometer process is predicted to increase more than double compared to the previous year, as stated by Wang.

On Monday, Needham analysts predicted that TSMC would increase its 2024 revenue growth target and maintained a "buy" rating, raising the price target from $168 to $210 on the chip giant's U.S.-listed shares.

Needham expects TSMC to increase its 2024 revenue growth outlook from "low- to mid-20s" to "mid- to high-20s" on the upcoming earnings call while maintaining its 2024 capital expenditures target of $30 billion.

In the first quarter, TSMC had a 62% market share in global foundries, an increase from 59% in the same period last year, according to Counterpoint Research data.

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