TSMC shares surge on strong October sales and Japanese expansion plans

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TSMC shares surge on strong October sales and Japanese expansion plans
Credit: © Reuters.

Taiwan Semiconductor Manufacturing Co (TSMC), a leading name in the semiconductor industry, saw its shares climb 5.8% Today after reporting a substantial 34.8% increase in October sales month-on-month. The sales boost is attributed to the high demand for AI chips and the release of Apple (NASDAQ: AAPL )'s iPhone 15, contributing to a year-over-year revenue rise of 15.7%.

The company also announced plans to establish a second wafer fabrication plant in Japan, focusing on advanced 6nm process technology, bolstered by a $4.96 billion investment from the Japanese government. This move is part of a larger $13 billion initiative by Japan to bolster its semiconductor and generative AI capabilities, which includes TSMC's existing operations in Kumamoto.

Analysts are optimistic about TSMC's growth prospects, with Wedbush Securities' Matt Bryson predicting a robust fourth quarter driven by the seasonal demand for Apple products and the continued expansion of AI applications. TSMC's pivotal role as a supplier to industry giants such as Apple, AMD (NASDAQ: AMD ), Nvidia, and Qualcomm (NASDAQ: QCOM ) positions it well to benefit from positive shifts in handset market dynamics and a recovery in macro conditions.

Bryson expects that technological trends requiring more semiconductor content—like AI, Internet of Things (IoT), electric vehicles (EVs), autonomous vehicles, augmented reality (AR), and virtual reality (VR)—will further fuel demand for TSMC's manufacturing capabilities.

Amid these developments, Nvidia Corp (NASDAQ: NVDA ) CEO Jensen Huang credited TSMC and its founder Morris Chang for their significant contributions to Nvidia's success, even as chip technology approaches its physical limits.

In response to these announcements, TSM shares witnessed an uptick of 3.05% to $94.41 in premarket trading Today. The broader SOX index, which includes TSM as one of its 30 constituents, also saw gains with a 3.6% increase during Friday afternoon trading sessions.

InvestingPro Insights

In light of the latest developments, InvestingPro provides some key insights. The real-time data suggests TSMC's strong market position with a substantial market cap of $445.81B. The company has also demonstrated a robust P/E ratio of 16.1, indicating a favorable valuation by investors. The company's revenue for the last twelve months as of Q3 2023 stood at a whopping $66,997.44M, further highlighting its financial strength.

InvestingPro Tips reveal TSMC's consistent performance in the market. The company has not only yielded high returns on invested capital but also consistently increased its earnings per share. It's worth noting that TSMC has raised its dividend for 3 consecutive years, a promising sign for investors seeking regular income. Furthermore, 16 analysts have revised their earnings upwards for the upcoming period, painting a bright future for the company.

In addition, TSMC's impressive gross profit margins and high return on assets further underscore the company's financial health and operational efficiency. Lastly, the company's status as a prominent player in the Semiconductors & Semiconductor Equipment industry aligns well with the article's discussion of its pivotal role as a supplier to industry giants.

For more insightful tips like these, the InvestingPro platform offers a total of 22 additional tips related to TSMC, providing a comprehensive analysis for potential investors.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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