TSMC shares jump 4% after 40% increase in May sales

TSMC shares jumped 4% following a reported 39.6% year-over-year surge in May revenue, reaching NT$320.5 billion, driven primarily by robust demand for AI chips, particularly from Nvidia. While TSMC acknowledges potential indirect impacts from tariffs, CEO C.C. Wei emphasized that AI demand remains very strong and consistently outpaces supply, mitigating tariff concerns. The company reaffirmed its 2025 fiscal year guidance of mid-20% growth.

Analysis

Taiwan Semiconductor Manufacturing Company (TSMC) experienced a significant share price increase of over 4% after reporting a 39.6% year-over-year surge in May revenue to NT$320.5 billion (approximately $10.7 billion), surpassing market expectations. This robust performance is primarily attributed to sustained high demand for artificial intelligence (AI) chips, particularly from key clients like Nvidia, signaling a stronger-than-anticipated rebound in the semiconductor sector. Although May's revenue saw an 8% sequential decrease from April, the substantial year-over-year growth, following a 48% annual increase in April, highlights a consistent upward financial trajectory. Regarding U.S. tariffs, TSMC's CEO C.C. Wei acknowledged a potential "some impact" on end-market demand due to higher prices for importers, but emphasized that AI demand currently remains "very strong" and is "consistently outpacing supply," with no observed changes in customer behavior. The company reaffirmed its fiscal year 2025 guidance for mid-20% growth and confirmed ongoing discussions with the U.S. Commerce Department concerning its $165 billion investments in new U.S. factory facilities.

Key Decisions for Investors

• The sustained, robust demand for AI chips, particularly from key clients like Nvidia, coupled with TSMC's reaffirmed mid-20% growth guidance for FY2025, suggests a continued positive outlook, warranting consideration for maintaining or increasing exposure to TSM.
• Investors should monitor potential indirect impacts from U.S. tariffs on end-market demand and the progress of TSMC's U.S. factory investments, although the current strength in AI demand appears to be a significant mitigating factor against these concerns.
• The 8% sequential decline in May revenue from April, despite strong year-over-year growth, merits observation in future earnings reports to ensure the underlying growth trajectory remains robust and consistent.