Joel Baglole
Chip and semiconductor stocks are rising today after $Taiwan Semiconductor Manufacturing(TSM.US)$, the world's biggest chipmaker, posted a record net profit for the second quarter.
Taiwan Semiconductor reported revenue of 534.14 billion Taiwanese dollars ($18.16 billion) for the quarter, up almost 44% year-over-year (YOY) and beating analyst expectations. Further, a net income of 237.03 billion Taiwanese dollars was up 76% YOY, marking a record quarter for the company.
These stellar results are now alleviating concerns that weak demand from high inflation will hurt the semiconductor sector this year. Currently, TSM stock is down 32% year-to-date (YTD) at just over $81 per share.
Semiconductors Stocks: What's Happening With TSM Stock?
In addition to the strong Q2 results, Taiwan Semiconductor — which is a top chip supplier for $Apple(AAPL.US)$ — forecast revenue between $19.8 billion and $20.6 billion for Q3. That's up substantially from the $14.8 billion in Q3 revenue it saw in 2021. Still, CEO CC Wei warned about "greater challenges in the supply chains" in a post-earnings call.
Taiwan Semiconductor makes chips and semiconductors for other companies and has some of the most specialized manufacturing processes in the sector. The company says it is seeing growing weakness among consumers and "softening demand" for products like smartphones, even as demand strengthens for data centers and automotive chips. Wei believes inventory levels are coming down to represent a "typical cycle" for semiconductors.
Overall, TSMC's Q2 report is positive news for semiconductor stocks at large. Worries about rising prices, waning consumer demand and elevated chip supply have all hurt most major chip players this year. Both $NVIDIA(NVDA.US)$ and $Advanced Micro Devices(AMD.US)$ have fallen 40% in the past six months. Now, though, this latest Q2 report is alleviating some of these concerns. If other chipmakers also report strong Q2 results, it could add momentum to the recovery.
What's Next
TSM stock and other semiconductor stocks are getting a reprieve today, moving higher on Taiwan Semiconductor's strong financial Q2 results. How long this rise in share prices lasts remains to be seen. However, any improvement in sentiment toward semiconductors stocks is welcome at this point.
