HSBC recently released a report indicating that Taiwan Semiconductor Manufacturing Company (TSMC) is expected to continue performing at the high end of its guidance, driven by accelerated mass production and pricing improvements of its 2nm technology. These advancements are anticipated to expand profit margins and drive earnings growth over the next two years.
TSMC is scheduled to release its third-quarter earnings report soon. HSBC forecasts that TSMC's third-quarter revenue and gross margin will reach the upper end of the company's guidance. The total monthly sales from July to September amounted to 760 billion New Taiwan Dollars, exceeding the quarterly revenue guidance range of 728 billion to 754 billion New Taiwan Dollars.
HSBC aligns its third-quarter revenue prediction with market expectations, estimating TSMC's revenue to be approximately 743 billion New Taiwan Dollars. The bank expects TSMC's Q3 gross margin to be 55.5%, meeting the high end of the company's guidance. Furthermore, TSMC's projected capital expenditure for 2024 is set between $30 billion and $32 billion, with HSBC anticipating it will reach the upper limit, surpassing market consensus.
The report attributes this to TSMC's continued investment in expanding its CoWoS (chip packaging technology) capacity to meet the AI demand, alongside accelerated mass production of 2nm technology. TSMC management has reported significant progress in 2nm development, with mass production expected to start in 2025 and revenues contributing by the latter half of the year.
Nomura Securities also highlights TSMC as a core semiconductor stock in the ongoing AI cycle despite potential risks in its non-AI-related business. The firm predicts substantial cyclical rebounds by 2025, supported by increased demand for various chip technologies. Nomura anticipates TSMC's revenue growth of over 10% in the fourth quarter and an annual increase of 28% in 2024.
Additionally, Nomura expects incremental outsourcing from Intel that could support revenue growth from 2025 to 2026. CoWoS capacity is projected to reach significant levels by the end of 2026, although a supply-demand balance is not anticipated before then.
Both HSBC and Nomura have adjusted their price targets and earnings forecasts for TSMC, reflecting optimism about its leadership in advanced node foundries and its position as a major beneficiary of AI and high-performance computing growth.
