Taiwan Semiconductor Manufacturing (TSMC) had an impressive year in 2023, despite experiencing a decline in annual revenue. With a solid 40% rally in its stock and a market capitalization of approximately $530 billion, TSMC’s performance raises speculation on whether it could be the next tech giant on the rise.
While TSMC has benefited from its association with Nvidia’s AI chips and systems, the company’s success is not solely dependent on this relationship. In fact, TSMC’s revenue streams are diverse, with High-Performance Compute (HPC) accounting for 42% of revenue and smartphone chips contributing 39%. The industry’s chip inventory, particularly in consumer electronics like PCs and smartphones, has significantly improved compared to previous years, setting the stage for growth in 2024.
TSMC recently reported its revenue for December 2023, amounting to 176,300 New Taiwan dollars (NTD), or $5.8 billion, which represents an 8.4% year-over-year decline. However, this decline is a vast improvement compared to the mid-teens percentage declines experienced earlier in the year. The company’s Q4 revenue is projected to be 625,529 NTD (or $20.6 billion), indicating a significant sequential increase of 19%. These positive revenue trends suggest that TSMC is poised for a turnaround in the coming year.
Higher revenue growth potential, driven by gains in consumer electronics and AI from customers like Nvidia, could contribute to an increase in TSMC’s profit margins. As a manufacturing-based business, TSMC’s operating margins tend to rise and fall in correlation with sales. If the recent surge in semiconductor manufacturing activity continues, TSMC’s earnings are expected to climb higher in 2024. Valued at just 18 times trailing-12-month earnings per share, TSMC’s stock is a compelling investment opportunity.
Leading companies and researchers in the semiconductor industry are predicting that chip sales will reach $1 trillion annually by 2030, nearly double the figures seen in 2023. As the go-to manufacturer in the industry, TSMC stands to capture a significant portion of this revenue and generate ample profits along the way. With projections of higher sales, increased profit growth, and potential valuation expansion, TSMC could become the next $1 trillion market-cap business in the next three to five years.
Investing in TSMC in 2024 and beyond seems promising, as the company shows great potential for growth and profitability in the coming years.
The source of the article is from the blog portaldoriograndense.com