Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) saw accelerating revenue growth in the first two months, highlighting strong demand for AI chips.

The data released on Monday showed that Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR(TSM.US) had revenue of approximately 260.09 billion New Taiwan Dollars in February, a decrease of 11.3% compared to the previous month, and an increase of 43.1% compared to the same period last year. The total revenue for the first two months was 553.3 billion New Taiwan Dollars, a 39% increase year-on-year. In contrast, the annual growth rate for 2024 was 34%, with analysts on average expecting the growth rate for this quarter to reach around 41%. As a manufacturer of most artificial intelligence chips globally, the sales of Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR serve as a barometer for the industry. The accelerated growth of Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR seems to indicate a flexible demand for chips used in artificial intelligence development. Wall Street and Silicon Valley are currently debating the sustainability of the artificial intelligence boom, which previously propelled NVIDIA Corporation(NVDA.US) to become the world's most valuable company, especially after China's DeepSeek seemed to challenge the viewpoint of large-scale investment in computing power. Bloomberg analysts Masahiro Wakasugi and Takumi Okano stated, "Export data shows strong growth in integrated circuit exports from Taiwan to China in January, indicating that sales of artificial intelligence chips are boosting the revenue of Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR. While the shipment volume of 300mm silicon wafers suggests a recovery, the 200mm silicon wafers seem to reflect weak demand from the automotive and industrial sectors. Electronic components need to be obtained from orders from consumer equipment companies." Last week, Broadcom Inc. (AVGO.US) became the latest major tech company to ensure that artificial intelligence computing spending remains healthy. Prior to this, Hon Hai Precision Industry Co., Ltd., the parent company of Foxconn, saw a 25% year-on-year increase in revenue for the first two months of 2025, faster growth than the same period last year, reflecting a continuous expansion of artificial intelligence computing demand. One major uncertainty that Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR faces in 2025 is whether U.S. President Trump will impose tariffs on chip imports. Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR may benefit from advance shipments or stockpiling. Last week, the company's CEO outlined an additional $100 billion investment with Trump at the White House, one of the largest expenditures by a foreign company in the U.S. manufacturing sector. This $100 billion will be used to build three wafer plants, two advanced packaging plants, and a research and development center, bringing Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's total investment in the U.S. to $165 billion. This move is widely seen as to avoid tariffs. However, the CEO stated that due to the huge demand from U.S. customers, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR is expanding its investments in the U.S., adding that its production lines for this year and the next two years are already fully booked. Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR plans to build 5 new chip factories in the U.S. should President Trump threaten to impose tariffs on semiconductor imports. Bloomberg credit analyst Cecilia Chan pointed out in a report that the additional $100 billion investment will not impact the credit rating of Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR because the company holds a net cash position of $44 billion, an all-time high. However, if the funding for the "Chip Act" called for by Trump is cut off, it could prolong the time to reach breakeven and further affect profit margins. Against the backdrop of increased investment in the U.S., Wall Street analysts unanimously favor Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR. Goldman Sachs Group, Inc. has a "Buy" rating on Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, with a target price of NT$1400 for Taiwan stocks and $259 for ADRs; Goldman Sachs Group, Inc. believes that the further increase in investment in the U.S. by Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR is not surprising. This decision aims to balance the reduction of production concentration risk (currently 95% of capacity is in Taiwan) with the dual goal of meeting U.S. customer demand. Goldman Sachs Group, Inc. emphasizes that, more importantly, despite the increased investment in the U.S., Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's long-termThe gross margin guidance for the quarter remains at "53% or above".Morgan Stanley maintains a "overweight" rating on Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR with a target price of NT$1500. Morgan Stanley stated that Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's expansion plans are in line with the bank's previous expectations, which alleviates two major risk factors that investors have been concerned about in the past 2-3 weeks: the risk of semiconductor tariff escalation and potential operational challenges from participating in Intel Corporation's "rescue plan." Morgan Stanley believes that this is the best course of action for Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR at the moment. Morgan Stanley reiterated an "overweight" rating on Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR with a target price of NT$1388. Morgan Stanley also believes that Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's expansion in the U.S. is not surprising. In a report released in February of this year, Morgan Stanley mentioned that Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR may further expand its U.S. wafer fabs to meet the demands of U.S. customers in reducing tariff risks. Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR previously mentioned that overseas factories might dilute gross margin by 2-3 percentage points, and Morgan Stanley believes that this impact is already reflected in the expectations, therefore posing no additional risk to future gross margin forecasts.