#TSMCQ2NetProfitSurges77%

TSMC’s Quarter of records proves the AI demand is powering the semiconductor sector! Taiwan Semiconductor (TSMC) released a quarter of such impressive growth numbers: Record profits, record revenues, a good operating margins too, all signs that AI demand is still powering growth within the semiconductor sector at an unsustainable rate. Not only I am amazed at TSMC crushing earning expectations.

What is more interesting to me is the growth that they show from their advance manufacturing nodes.

Seeing their cutting edge chip technologies now represent such a big proportion of the revenue generated by their wafers means that customers are pushing their demand for faster chip which will ultimately power artificial intelligence and high performance cloud services. Also the proportion of their revenue generation coming from high performance computer services means that the construction of data center is already one of the most strategic aspect of every big technology company which will eventually led to the construction of even bigger and better data center which could potentially speed up further their search to develop better AI technology. Interestingly even though these results came with some interesting data, the share price of TSMC was under pressure. I believe that the company may be pressured not because the business isn’t growing or promising, but because TSMC announce an increase of its capital expenditure for the future.

Increase spending now will definitely lead to better productive capacity in the future, but will also put pressure to TSMC when it comes to the costs, to the management of their operations and how the company is going to make all these investments pay off.

Personally, I think that an increase in CAPEX should be looked as an increased commitment and confidence by the management, because the companies does not take such a big risk to not expect a high return for all these capital expenses over the long term. On the other hand this might also mean that short-term gains may not materialize and the market might continue to trade in a range as investors reflect and re-evaluate long-term prospects versus the cost of their development. In the end, I think this quarter confirms my view that AI is not going to stop and the companies which develop the infrastructure are as important as the companies which develops the applications on the cloud.

Do you think that this massive increase in capital expenses will create the best investment for the future of TSMC?

‍#AI #GateSquare