taiwan semiconductor manufacturing (TSM) on Wednesday reported better-than-expected first-quarter sales thanks to strong demand for its artificial intelligence chips. TSM stock rose on the news.
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The world's largest chip foundry, better known as TSMC, announced a 16.5% year-on-year increase in sales in local currency for the March quarter. Analysts had expected sales to rise 13.9%.
TSMC's third-quarter sales were worth $18.86 billion, compared to expectations of $18.26 billion. Sales for the same period last year were $16.62 billion.
TSMC's first-quarter sales increased after four consecutive quarters of sales declines.
Taiwan Semiconductor's customers include: AMD (AMD), apple (AAPL) and Nvidia (NVDA), just to name a few.
TSM stock rises after news
TSM stock rose 1.1% to 146.93 in midday trading on the stock market.
According to TSMC, sales in March increased 34.3% year-on-year and 7.5% from February.
Strong sales of chips for AI and data center applications offset weakness in other areas, analysts said.
“AI Pick and Shovel Story”
Needham analyst Charles See reiterated his buy rating on TSM stock and raised his price target from 133 to 168.
“We believe TSMC is one of the best AI pick-and-shovel stories,” Shi said in a client note.
However, he lowered TSMC's second-quarter forecast to reflect the impact of the April 3 earthquake in Taiwan.
“While TSMC reaffirmed its full-year outlook for revenue growth in the low to mid-20s, there may be short-term production delays and wafer losses that could negatively impact June quarter sales. Yes,” said Shi. “We expect TSMC to make up for most of the revenue lost in the third quarter and achieve its full-year growth target.”
TSM stock ranks first in the group
Bernstein analyst Mark Lee maintained an Outperform rating on TSM stock after the chipmaker's report. He has a price target of $150 for Taiwan Semiconductor's U.S. shares.
Lee noted that Apple's iPhone chip orders at TSMC appear to be intact. He said the iPhone sales slump is likely to be limited to China.
TSM stock ranks No. 1 out of 33 stocks in IBD's Semiconductor Manufacturing industry group, according to IBD Stock Checkup. IBD overall rating is 89 out of 99 points.
Follow Patrick Seitz on X (formerly Twitter). @IBD_PSeitz Check out more articles on consumer technology, software, and semiconductor stocks here.
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