TSMC Hits $1 Trillion Market Cap, Setting New Benchmark for Asian Companies

On Thursday, TSMC announced a substantial 54% increase in net profit for the September quarter, reaching NT$325.3 billion ($10.1 billion), surpassing expectations. The company also projected fourth-quarter revenues between $26.1 billion and $26.9 billion, exceeding forecasts of $24.9 billion.

In the third quarter, revenue from 3-nanometer wafer shipments constituted 20% of the total, while 5-nanometer and 7-nanometer technologies contributed 32% and 17%, respectively. Collectively, advanced technologies, which include 7-nanometer and more sophisticated processes, made up 69% of the total wafer revenue. Wendell Huang, the CFO, noted, "Our third-quarter performance was bolstered by robust demand for our cutting-edge 3nm and 5nm technologies, driven primarily by the smartphone sector and AI-related applications."

Following these announcements, TSMC's market value briefly surpassed the $1 trillion mark. Its stock price far exceeds that of its competitors in the foundry business, Samsung and Intel. Samsung has consistently lagged behind TSMC due to issues with product yield rates.

According to Bloomberg analyst Charles Shum, TSMC's guidance for a gross margin exceeding 57% in the fourth quarter—higher than the consensus estimate of 54.7% underscores strong ongoing demand for its AI chips, particularly from Nvidia and other clients. TSMC further sees gross profit margin in the 4thquarter to be between 57.0% and 59.0%. Shum suggests that a 25% sales growth in 2025 is achievable, supported by TSMC's proprietary CoWoS semiconductor packaging technology.

Analysts at Wedbush noted the enduring strength from AI-related demand, raising their price target and maintaining an outperform rating on TSMC's shares.

HSBC has raised its price target for Taiwan Semiconductor Manufacturing to NT$1,600.00 from the earlier NT$1,535.00, maintaining a Buy rating on the stock. This revision highlights a bullish stance on the semiconductor firm’s future prospects, especially with its forthcoming 2-nanometer (2nm) chip technology slated to start generating revenue by the second half of 2025. The bank's positive outlook is driven by the expected premium pricing of the 2nm chips, which are projected to command an average selling price (ASP) that is more than 30% higher than current chip technologies.

Before the earnings release, some investors remain skeptical about the sustained growth in global AI spending, questioning whether major tech companies such as Microsoft and Meta will continue their heavy investments in chips and data centers in the absence of groundbreaking applications.

Looking ahead, TSMC is aggressively expanding internationally. A senior Taiwanese official reported that the company is planning additional manufacturing facilities in Europe, targeting the AI chip market, complementing ongoing construction projects in Japan, Arizona, and Germany.

Shum noted that the swift integration of 2.5D and 3D packaging technologies is opening new growth horizons, particularly in the realm of cutting-edge server and mobile processors. These advanced packaging methods are becoming increasingly crucial for next-generation computing devices. Simultaneously, the industry anticipates an expansion in gross margins over the coming year, driven by strategic price adjustments and improvements in production efficiency.