Taiwan Semiconductor Manufacturing, the world's largest contract chipmaker, on Friday reported better-than-expected sales in May thanks to production of artificial intelligence chips and a recovery in PC demand. TSM stock rose on the news.
The company, better known as TSMC, said its sales rose 30.1% in local currency in May from the same month last year. But sales dipped 2.7% from April. In the January through May period, TSMC sales are up 27% year over year.
TSMC's second-quarter sales are tracking ahead of expectations, Bernstein analyst Mark Li said in a client note.
"If June follows the average seasonality of the past eight years, Q2 2024 revenue would come 12% above both the guidance midpoint and consensus," Li said. He rates TSM stock as outperform.
Analysts polled by FactSet expect TSMC to earn $1.37 per U.S. share, up 21% year over year, on sales of $19.95 billion, up 29%, in the second quarter.
TSM Stock Rises After Sales Report
On the stock market today, TSM stock advanced 1.4% to close at 164.39. Earlier in the session, Taiwan Semi shares notched a record high of 166.12.
On May 10, TSM stock broke out of a double-bottom base at a buy point of 148.43, according to IBD MarketSurge charts.
Bernstein's Li said TSMC is benefiting from production of AI chips for Nvidia and a cyclical recovery in demand for personal computers.
Meanwhile, production has been resilient for chips for the Apple iPhone, Li said. Also, sales of high-end Android smartphones have been better than expected, he said.
Wedbush Securities analyst Matt Bryson reiterated his outperform rating on TSM stock on Friday.
"We would attribute the better-than-forecast results to multiple tailwinds that we believe are benefiting TSMC fundamentals," he said in a client note.
"AI server demand remains robust, while standard server demand appears to be bouncing back," Bryson said. "Moreover, areas that a few months ago looked weaker (PCs and handsets) seem to now be recovering."
TSM stock is on two IBD lists: Leaderboard and Tech Leaders.
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