To The Moon

$Taiwan Semiconductor Manufacturing(TSM)$ just released its third-quarter earnings, and the results are staggering!

Revenue and Profit

- Revenue hit $23.5 billion, up 36% year-over-year, surpassing the upper end of management's guidance of $23.2 billion.

- Gross margin soared to 57.8%, well above the guidance of 55.5%.

- Net profit reached a historic $10.06 billion, a huge 50.9% increase, far exceeding analysts' expectations, with a net margin of 42.8%.

Unsurprisingly, after this blowout report, TSMC’s stock surged nearly 7% in after-hours trading, breaking the $200 mark.

The driving force? AI.

In Q3,

• high-performance computing (HPC) contributed 51% of revenue, growing 11% quarter-over-quarter.

• Smartphones made up 34% of revenue, increasing 16%.

• IoT and automotive chips also saw sequential growth.

• And Digital consumer electronics experienced a slight decline.

AI chips were primarily in advanced nodes, with 3nm technology contributing 20% of revenue, 5nm adding 32%, and 7nm accounting for 17%. Altogether, advanced process nodes contributed a record 69% of total revenue.

Bullish Outlook

Thanks to increased production in advanced nodes and improved capacity utilization, TSMC's gross margin blew past expectations, and looking ahead to Q4, the company projects a gross margin between 57% and 59%, well above analysts' forecast of 54.7%.

TSMC also raised its Q4 revenue guidance to $26.1-$26.9 billion, significantly beating the expected $24.94 billion. With this, TSMC has upgraded its 2024 revenue growth estimate to 30%, up from around 20% previously.

Q4 capital expenditure is set to slightly exceed $11.5 billion, right in line with expectations.

AI demand remains robust, and TSMC expects this trend to continue. Management signaled that 2024 capital expenditure will surpass this year's, driven by strong demand for 2nm technology, which is expected to outpace 3nm in demand.

Overall, this earnings report was extremely optimistic, reinforcing confidence in AI’s potential. As TSMC’s stock surged, $NVIDIA Corp(NVDA)$ shares also rose by over 2%, reflecting the broader AI enthusiasm.

TSMC’s dominance in AI chip manufacturing—thanks to its advanced process technology—leaves competitors like $Samsung Electronics Co., Ltd.(SSNLF)$ and $Intel(INTC)$ struggling to keep up.

TSMC's management hinted that current AI demand is just the beginning, suggesting even larger revenues ahead.

Despite its massive growth, TSMC's price-to-book ratio is still below the last semiconductor boom, potentially indicating that the company could soon hit a trillion-dollar market cap!