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Key Takeaways
- ADRs of Taiwan Semiconductor Manufacturing Company fell in intraday trading Thursday as the chip maker reported Q1 results above estimates but lowered overall projections for semiconductor revenue.
- TSMC executives said they are projecting semiconductor revenue overall to rise 10% year-over-year in 2024, compared with prior projections of at least 10% gains.
- Executives noted the automotive industry as the one sector where TSMC’s revenue could fall year-over-year, while AI demand strength was a positive talking point.
American depositary receipts (ADRs) of Taiwan Semiconductor Manufacturing Company ( TSM ) fell in intraday trading Thursday, after the chip maker’s comments in an earnings call lowering projections for everything apart from artificial intelligence (AI )-related semiconductors offset higher-than-forecast results.
TSMC reported first-quarter revenue of 592.64 billion New Taiwan dollars ($18.87 billion), above estimates compiled by Visible Alpha of TWD583.95. The company reported TWD225.49 billion in net income, along with a diluted earnings per share (EPS ) of TWD8.70 ($1.38 per ADR), compared to the TWD214.07 billion and TWD8.25 per share analysts expected.
However, comments from TSMC management altering some full-year projections at the chip maker’s earnings call that were cited by Wedbush Securities and Jefferies analysts may have outweighed the earnings beat.
While noting that demand for its technology to power AI technology remains high, TSMC executives said they are projecting semiconductor revenue overall to rise 10% year-over-year in 2024, compared to its own prior projections of at least 10% gains.
The company specified chips for the automotive industry as its only sector that might face declines year-over-year, although it noted that demand for smartphone and PC chips is growing slower than expected.
Despite the downgraded projections by TSMC, Wedbush analysts maintained an “outperform” rating and raised their target price for the company’s Taiwan Stock Exchange-listed shares to TWD900 each from TWD850. TSMC shares there closed Thursday trading at TWD804.
TSMC supplies a number of U.S. companies, notably in the AI industry with Apple ( AAPL ) and Nvidia ( NVDA ) among its key customers. The Taiwanese company also reached an agreement with the federal government earlier this month to receive up to $6.6 billion in funding from the CHIPS and Science Act to expand a number of facilities it started building in Arizona in 2021.
The company also said in a filing that a 7.4 magnitude earthquake that hit Taiwan earlier this month did not cause substantial damage to any of its facilities but estimated it would have a negative impact of about TWD3 billion ($92.4 million), which will be realized in the second quarter of 2024.
TSMC ADRs were trading down 3.8% at $133.75 at 12:15 p.m. ET Thursday, but are up more than 50% in the past year on investor enthusiasm for companies that power AI.