TSM: 1Q24 earnings call reinforced some very bullish developments
$Taiwan Semiconductor Manufacturing(TSM)$
TSM down 10% last week mainly on market weakness/Semis sector weakness/ Gross margin headwinds, but the 1Q24 earnings call reinforced some very bullish developments.
1) top line growth is very much intact on strength in high performance computing/AI, strong demand for 3nm-5nm. TSM beat in 1Q & 2Q revenue $19.6-20.4B above the Street at $19.08B. This puts the trajectory for the year towards the high end of the +20-25% revenue growth. With META $Meta Platforms, Inc.(META)$ & TSLA $Tesla Motors(TSLA)$ guiding to higher Capex, much of which is AI focused, this seems very achievable.
2) Notably TSM will achieve this growth despite several end markets down YoY now including Auto. This means 2H24 & FY25 are setting up for stronger unit recovery when these end markets improve.
3) on the call part of the GP headwind is transition of 5nm to 3nm & lower utilization on 3nm ramp (depreciation costs spread across fewer units). Management stated they priced 3nm early & costs rose in that time frame. 2nm pricing will come in much higher as as costs are passed on & most notably management recognizing the value capture mix is occurring with their customers meaning the pie will shift back to TSM for 2nm & beyond. The 15-20% revenue CAGR seems very achievable IMO.
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