Taiwan Semiconductor Manufacturing (TSM) -6.68%))Although commonly known as TSMC, it has so far unforgettable 2025 despite starting the year with a bright note. Foundry Giant stocks have slipped more than a third of their 52-week highs that reached on January 24th.
TSMC’s pullback is the result of the overall negativity of high-tech stocks behind the tariffs imposed by the Trump administration. The tariff war has led to increased manufacturing costs for technology companies that manufacture products other than the US, and fears that they will deploy artificial intelligence (AI) data centers and increase the costs of tech giants curbing spending.
Furthermore, tariffs are expected to have a negative impact on the growth of the US economy. This explains why the likelihood of a recession has increased. All of these factors weighed the TSMC strain this year.
However, a closer look at the company’s sales for the first two months of the year suggests that stocks can be escaped from the existence of its stocks. Specifically, it’s no surprise to see TSMC stocks stepping on gas again following the release of their first quarter earnings report in 2025.
Let’s take a look at why TSMC is poised this month to provide stronger results and guidance than expected.
TSMC sales are growing with great clips
Taiwanese semiconductor revenues for the first two months of 2025 increased at an impressive 39% rate compared to the first few months of last year. At this rate, TSMC appears to be on the way to surpass its first quarter 2025 revenue guidance.
When TSMC released its fourth quarter 2024 results this January, the company induced first quarter revenues at the midpoint of its range. This translates to a 34% increase from the previous year, significantly improving the 13% revenue growth rate provided in the same period last year. However, the growth trajectory of the Taiwan semi-finals in the first two months of the year shows that it could exceed its own expectations.
Meanwhile, considering TSMC expects a 5.5% point jump in its operating margin, revenue should also grow at a great pace. Naturally, analysts expect first-quarter revenues to rise by 49% to $2.05 per share from the previous year period, but this could be better than that given the demand for robust AI chips.
The surge in sales of TSMC can be attributed to the rapidly growing demand for AI chips currently deployed in multiple applications, from data centers to smartphones, personal computers (PCs) to cars. nvidiaone of TSMC’s top customers, has recently reported witnessing unprecedented demand for Blackwell AI graphics processing units.
Taiwan Semiconductors manufactures Blackwell GPUs designed by Nvidia. It focuses on actively increasing AI chip production capacity and filling Nvidia’s orders. Reports say NVIDIA has cornered more than 70% of TSMC’s advanced chip packaging capabilities to meet Blackwell demand. Additionally, shipments of TSMC’s advanced chip package modules are reportedly increasing 20% quarterly, so the company is looking to add two more facilities to increase supply.
Nvidia expects revenue to rise by 65% in the current quarter, earning a large portion of its revenue from sales of AI data center chips. Please introduce the supply chain improvements that TSMC is making. It’s easy to see why quarterly performance and guidance are likely to break Wall Street expectations.
Meanwhile, other AI chip companies Broadcom and Marvel Technology We are also looking for significant sales growth. Broadcom and Marvell have spent a lot of time on the rapidly growing demand for custom AI processors and the fact that TSMC is manufacturing them. Similarly, another TSMC customer – Advanced Micro Devices – We have witnessed an increasing demand for central processing units of power personal computers (PCs), a market driven by generative AI.
Thanks to AI, the future appears to be bright for Taiwan’s semiconductors, as it is firmly positioned to make the most of the secular growth of the chip market.
The inventory is so attractive that it can’t be ignored now
The recent pullbacks in TSMC stocks mean that they can currently buy with less than 25 times the revenue, but they have increased future revenues of less than 19 points towards their final growth. These multiples are cheaper NASDAQ-100 The price-to-return ratio for the Index is approximately 29 (using the index as a proxy for high-tech inventory).
Analysts expect TSMC’s revenue to increase by 29% in 2025. Better yet, analysts are raising expectations for revenue growth over the next few years.
TSM EPS Estimates for the Current Financial Year Data based on data YCHARTS.
However, TSMC’s growth could be better than analysts expect. The company expects to increase revenues at a combined annual growth rate (CAGR) of 20% over the next five years. That’s why investors are trying to add AI stocks that can bring healthy, long-term benefits, and that it’s trading at the attractive valuation right now can be considered loading it into TSMC before it surges.
The harsh Chauhan has no position in any of the stock mentioned. Motley Fool recommends advanced microdevice, Nvidia and Taiwanese semiconductor manufacturing. Motley Fool recommends Broadcom and Marvell Technology. Motley Fools have a disclosure policy.
