$TSM Tanks While Revenue Explodes 33%? Yeah makes sense... (Wall Street Logic 101)

Apparently, not even a 33% revenue jump can keep investors from giving Taiwan Semiconductor ($TSM) the cold shoulder—and no, it’s not because they’re still salty about the chip shortage that made their PS5 impossible to find.

(Source: Giphy) 

TSMC, aka the global overlord of contract chip manufacturing, just reported that its August sales hit a casual NT$250.87 billion ($7.8 billion), up from NT$188.46 billion a year ago. That’s more than a third higher. But despite this impressive flex, TSMC’s stock took a 2.2% dive, because, well… Wall Street Logic 101. 

(Source: Barrons) 

Now before we dive into that, what in the actual heck is driving this cash tornado? You guessed it: AI chips. Because every tech company under the sun wants in on the artificial intelligence gold rush, and TSMC is the one handing out the pickaxes. For those living under a rock, TSMC’s chips power everything from Nvidia’s AI supercomputers to the latest iPhones, Androids, and even your grandma’s PC that she only uses for Facebook.

(Source: Giphy) 

Again, if you haven’t noticed yet (or read any previous of our jagillion Stocks.News articles on the matter), AI is hotter than Texas sidewalk in the summer. And while some folks are already bracing for the bubble to burst, TSMC’s August performance proves that the AI demand train is still hurtling down the tracks at full speed.

For instance, Mark Li, an analyst at Sanford C. Bernstein (and probably the only guy still wearing a tie in Silicon Valley), sums it up nicely: “AI is a sustainable trend that will drive semiconductor demand for years to come.” Translation: Get ready for more headlines about how AI is going to “change everything,” from toaster ovens to, apparently, Siri understanding basic commands. 

(Source: Giphy) 

However, with that said, even with all the buzz, TSMC’s stock can’t seem to catch a break today due to the fact that the market’s collective attention span is shorter than a TikTok video. Why? Well, not surprisingly, Nvidia’s recent stock plunge (aka the biggest single-day wipeout in its history) spooked everyone, and now chip stocks are getting ghosted harder than Kevin Spacey’s acting career after he was found on the Epstein List. 

(Source: Barrons) 

Meaning, despite pint up AI demand from clientele, investors are finally realizing that they may be waking up to a portfolio full of overpriced chip stocks. For instance, Mike Bancroft, co-manager of the Eastspring AI Disruption Fund, put it best: “Many investors had priced in a more optimistic outlook toward the end of this technology upcycle.” Translation: They thought AI would fix everything from world hunger to their student loans, but reality is - not only is the industry still overshadowed by hype, but we still don’t really know where all the AI money is going. (Another topic for another time). 

This has investors hedging their bets, dumping chip stocks, and looking for companies that’ll actually benefit from AI applications instead of just riding the wave. Think of it like this: They’ve moved on from the tech that creates AI, to the tech that is actually leveraging it to make money. 

(Source: Giphy) 

But still, despite the reshuffle, let’s not forget that TSMC is still an absolute beast in the industry.The company raked in NT$1.77 trillion ($55 billion) in the first eight months of 2024, a 31% jump from the same period last year. However, even though August revenue numbers are cool and all, let's also not overlook the fact revenue actually fell 2.4% from July’s record-breaking NT$257.64 billion. 

So clearly, investors have the memory of an elephant when it comes to bad news, but the attention span of a goldfish when it comes to good news (which also explains the -2.2% price dip). 

(Source: Giphy) 

Still, no one’s crying for TSMC. The company expects its Q3 revenue to surge about 34% from last year. So while the rest of us are struggling to afford a cup of coffee that doesn’t taste like cardboard, TSMC’s out here printing money like it’s Monopoly. Whereas, speaking of money, they’re expecting to rake in $22.4 billion to $23.2 billion for the July-September period. Which is pretty dayum impressive, if I must say so myself. 

(Source: Business Reporter

For investors who are conscious about companies who spend money hand over fist, this type of revenue will definitely help the companies full throttle expansion plans and $32 billion capital expenditures in the future. For example, TSMC is looking to build a $40 billion semiconductor hub in Arizona (because what’s more American than chips made in the desert?) and they just broke ground on a $10 billion fab in Germany—its first in Europe. 

(Source: QZ) 

The goal of all of this expansion you ask? Simple: to double the capacity for their advanced chip packaging tech—CoWoS, which sounds like a failed Silicon Valley startup but is actually crucial for Nvidia’s AI chips.

So given all of this, what’s the takeaway here? Well, despite the stock dip, TSMC’s fundamentals are still rock solid. It's riding the AI wave, building factories like there’s no tomorrow, and cementing itself as the indisputable leader in the semiconductor space.

(Source: Giphy) 

I mean, sure, investors are feeling a little hungover right now, but once the AI hype settles into reality, TSMC’s going to be sitting pretty at the top of the chip supply chain. In other words, this is one tech giant that isn’t going anywhere anytime soon. 

As Stifel analyst Arun Sundaram put it: “We continue to see TSMC as a structural winner in the chip supply chain.” Translation: Bet on TSMC like you’d bet on Tom Brady in the fourth quarter. (jk don’t listen to my financial advice, because A. What do I know? And B. If I did, I wouldn’t have spent close to $1,000 on family pictures when I had a perfectly good iPhone camera to do the job… so please act accordingly.) 

At the time of this writing Taiwan Semiconductors is down -0.63% on the day. 

P.S. While traders and investors are glued to TSMC or any other overhyped Big Tech company for that matter, our last Stocks.News alert shot up 162% in under 24 hours. And guess what? We’re literally about to release another explosive alert—click here for the details.

Stocks.News holds positions in Meta Platforms as mentioned in the article.