TSMC shares steady despite slowdown in monthly sales growth

TSMC shares remained largely unchanged despite reporting a 16.9% year-on-year increase in October sales, its weakest monthly growth since February 2024, which was nonetheless in line with analyst expectations. This moderation is attributed to currency effects and earlier order pull-ins, rather than a fundamental cooling in AI chip demand, as major tech companies plan over $400 billion in AI infrastructure investment next year. Investors appear confident in TSMC's pivotal role in the expanding AI sector, with the stock up 53% year-to-date.

Analysis

Taiwan Semiconductor Manufacturing Co (TSMC) reported a 16.9% year-on-year increase in October sales, which, while its weakest monthly growth since February 2024, was broadly in line with analyst expectations. The reported moderation was influenced by a stronger Taiwan dollar, as revenue in US dollar terms actually grew 22.6% to approximately $12 billion, suggesting underlying strength. TSMC shares remained largely unchanged, indicating investor confidence despite the headline growth figure.

Analysts attribute the slower reported growth to earlier order pull-ins and currency effects, rather than a fundamental cooling in demand for artificial intelligence (AI) chips. This perspective is reinforced by major tech companies, including Microsoft, Alphabet, Amazon, and Meta, planning to invest over $400 billion in AI infrastructure next year, representing a 21% increase from 2025. Nvidia and other chip designers continue to press TSMC for increased supply.

The market's muted reaction and TSMC's robust year-to-date performance, with a 53% value increase, underscore its strategic importance and resilience within the tech sector, especially given broader instability. Investors appear to be focusing on the long-term AI-driven growth narrative, overlooking short-term monthly fluctuations and currency impacts.

Key Decisions for Investors

• Investors should continue to monitor TSMC's order book and commentary regarding AI chip demand, as the current sales moderation is attributed to temporary factors like currency effects and order pull-ins, rather than a fundamental demand shift.
• Assess the impact of foreign exchange movements on reported revenues, noting that US dollar growth (22.6%) outpaced local currency figures (16.9%) for October sales.
• Maintain a long-term perspective on TSMC's pivotal role in the AI infrastructure build-out, given the significant projected investments from major tech players and the sustained demand from chip designers.