Taiwan Semiconductor Manufacturing Company (TSM), or TSMC, stock was up about 2% in the pre-market trading session today. The upside came after TSMC disclosed that its net revenue for January increased 36% year-on-year to NT$293.3 billion ($8.93 billion). However, the company said that it expects Q1 revenue to be near the lower end of its $25 billion and $25.8 billion guidance range due to the impact of an earthquake that hit southern Taiwan in late January.
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The company disclosed that the earthquake caused disruptions in TSMC’s production processes, leading to the scrapping of some semiconductor wafers. The estimated financial impact of the earthquake is about NT$5.3 billion ($161 million), net of insurance claims.
Despite the earthquake’s impact, TSMC remains optimistic about its full-year revenue outlook. The company said it is working to recover lost production. It must be noted that TSMC’s strong performance in the AI sector and continued demand for high-performance chips are expected to support its long-term growth prospects.
AI Demand Supports TSMC’s Sales Growth
TSMC’s sales growth is driven by the rising demand for AI technologies. The company’s AI accelerators, which include AI GPUs, AI6, and HBM controllers for AI training and inference in data centers, account for a major portion of its total revenue.
Further, TSMC’s efforts to make technological advancements are another key factor aiding its growth prospects. The company’s advanced process technologies, such as 3-nanometer and 5-nanometer chips, are used in high-performance computing (HPC) applications and data centers.
While the January earthquake has posed near-term challenges for TSMC, the company’s recovery efforts and strong market position keep it well-positioned for future growth.
Is TSM a Buy, Sell, or Hold?
Turning to Wall Street, TSM has a Strong Buy consensus rating based on five Buys and one Hold assigned in the last three months. At $243.67, the average TSMC price target implies 18.22% upside potential. Shares of the company have gained 23.63% over the past six months.
