Key Takeaways
- TSMC’s recent revenue performance, highlighted by a nearly 40% year-on-year increase in June 2024, solidifies its position as the primary engine of the global artificial intelligence hardware expansion.
- The company’s dominance is underpinned by a significant technological lead in advanced process nodes (3nm and 5nm), which now generate the majority of wafer revenue and create a formidable competitive moat against rivals.
- While operational execution remains nearly flawless, the company’s valuation reflects considerable market optimism, demanding careful scrutiny of both forward guidance and the persistent geopolitical risks associated with its location.
- TSMC’s monthly results have become a crucial barometer for the entire technology supply chain, offering a real-time indicator of demand from hyper-scalers and chip designers like Nvidia, AMD, and Apple.
The relentless pace of the artificial intelligence infrastructure build-out finds its most tangible measure not in abstract forecasts, but in the monthly revenue disclosures from Hsinchu. Taiwan Semiconductor Manufacturing Company’s (TSMC) recent performance serves as a powerful confirmation of this structural trend, with revenues demonstrating robust growth that continues to defy broader economic uncertainties. This financial strength is not merely a reflection of a single strong quarter, but rather the result of a multi-year strategy to dominate the world’s most advanced chip manufacturing, a position that now appears all but unassailable.
As the foundry for the world’s leading technology firms, TSMC’s results offer a direct, unfiltered view into the capital expenditure cycles of its largest clients. The sustained demand for its cutting-edge silicon is the critical bottleneck, and therefore the primary enabler, of the current AI boom.
A Barometer for the AI Supercycle
Dissecting the most recent figures reveals the sheer momentum behind the company. For June 2024, TSMC reported unconsolidated revenue of NT$262.59 billion, an increase of 39.9 percent compared to June of the previous year.1 While this represented a sequential increase from May, the year-on-year metric is what tells the story of the AI demand curve. This performance capped a strong second quarter, underlining the foundry’s pivotal role in the technology ecosystem.
To place this in context, the company’s performance throughout the second quarter of 2024 illustrates a consistent growth trajectory.
| Metric | April 2024 | May 2024 | June 2024 | Q2 2024 Total |
|---|---|---|---|---|
| Revenue (NT$ Billion) | 236.02 | 229.62 | 262.59 | 728.23 |
| Year-on-Year Growth | +59.6% | +30.1% | +39.9% | +42.7% (approx.) |
This consistent, high-growth performance is directly attributable to voracious demand for high-performance computing (HPC) and AI accelerators, designed by firms like Nvidia and AMD but manufactured almost exclusively by TSMC on its most advanced processes.
The Technological Moat Deepens
The headline revenue figures are a direct consequence of TSMC’s widening technological lead. The battle in the semiconductor industry is won or lost at the nanometre scale, and TSMC’s lead here is significant. During its most recent reported quarter, the breakdown by technology reveals a clear picture of this dominance.
According to TSMC’s first-quarter 2024 results, advanced technologies (defined as 7-nanometre and below) constituted 65% of total wafer revenue.2 The breakdown is even more revealing:
- 5nm Process: Accounted for 37% of wafer revenue.
- 7nm Process: Accounted for 19% of wafer revenue.
- 3nm Process: Accounted for 9% of wafer revenue.
The revenue contribution from the 3nm node, its newest and most complex process, is growing rapidly. This is the technology that will power the next generation of flagship smartphones and AI chips. The immense capital expenditure and technical expertise required to operate these fabrication plants create a barrier to entry that competitors like Samsung Foundry and Intel Foundry Services are struggling to overcome. While both are investing heavily to close the gap, TSMC’s execution and deep customer relationships have solidified its market share, which stands at over 60% of the global foundry market.3
Valuation and Geopolitical Realities
Exceptional performance has, unsurprisingly, been met with a significant re-rating of the company’s stock. With a forward price-to-earnings ratio that has trended well above its historical average, it is clear that the market has priced in a substantial amount of good news. This raises the critical question of whether such a valuation is sustainable.
The investment case rests on the belief that the AI supercycle is a long-term structural shift, not a short-term cyclical boom. From this perspective, TSMC is not just a manufacturer but a core piece of global digital infrastructure. However, this view must be tempered by two significant risks.
The first is the ever-present geopolitical tension surrounding Taiwan. Any escalation in the region represents an unquantifiable, systemic risk to TSMC’s operations and, by extension, the entire global technology sector. The second is the historical cyclicality of the semiconductor industry. While the current cycle is driven by the seemingly insatiable demand for AI, it is not immune to eventual market saturation or macroeconomic downturns that could impact enterprise spending.
The ultimate challenge for investors is therefore to balance near-perfect operational execution against a backdrop of premium valuation and significant external risks. The forward guidance provided by management in upcoming earnings calls will be crucial in determining whether the current momentum can be maintained. For now, the numbers suggest the engine of the AI revolution is running at full capacity.
References
1. TSMC. (2024, July 10). TSMC June 2024 Revenue Report. Retrieved from https://pr.tsmc.com/english/news/3222
2. TSMC. (2024, April 18). TSMC Reports First Quarter EPS of NT$8.70. Retrieved from https://pr.tsmc.com/english/news/3182
3. Counterpoint Research. (2024, May 30). Global Semiconductor Foundry Market Share: By Quarter. Retrieved from https://www.counterpointresearch.com/global-semiconductor-foundry-market-share/
4. StockSavvyShay. (2024, July 10). [$TSM JUST DROPPED $32B IN JUNE QUARTER REVENUE — UP 39% YOY & AHEAD OF THE $31.8B ESTIMATE]. Retrieved from https://x.com/StockSavvyShay/status/1879807511987171446
