Taiwan Semiconductor Manufacturing Co - TSMC ($TSM) Pre-earnings Analysis
The VanEck Semiconductor ETF $SMH just reached another new all time high, continuing its astounding rally thanks to names like Nvidia, TSMC, AMD, and other chip companies. The AI boom has sparked companies and countries across the globe to purchase advanced chips and upgrade their hardware to meet new artificial intelligence capabilities.
Nvidia and AMD took center stage when it came to this chip demand cycle, and TSMC was the silent killer who seriously benefitted from it. For context, TSMC does not design chips, but it is responsible for manufacturing the majority of the globe’s advanced chips. Apple, Intel, Nvidia, AMD, and many other chip companies rely on TSMC’s fabs to manufacture their designed chips.
For this reason, TSMC’s revenues have skyrocketed in the past two years. Quarterly revenue grew at 45% and 40% in the last two quarters, respectively. And net income grew at an even faster pace. The company is now generating more than $30 billion in revenue per quarter, nearly half of it is pure profit (after tax). The only company really growing at this pace is Nvidia, which goes to show how the two companies are working hand in hand and growing at the same rapid pace.
TSMC’s growth hasn’t gone unnoticed. The stock is up more than 60% in the past twelve months and is trading at record highs ahead of its earnings report. We’re covering it now because TSMC’s earnings data is not only critical to itself, but to the semiconductor industry as a whole. If the world’s largest chip manufacturer is speaking, everyone will listen, especially in a market where semiconductors have become the hottest topic. If TSMC reports any sign of weakness, it can force a correction across the space, Nvidia and AMD included.
Option chain analysis:
Earnings are scheduled on Thursday before market open. The option’s market is projecting a move of (+/-) $20 following the report and into next week (per the Jan 23rd exp).
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