Why Is Taiwan Semiconductor (TSM) Stock in the Spotlight Today?

Taiwan Semiconductor (NYSE:TSM) stock is in focus this morning after the chip manufacturer reported better-than-expected financial results and offered bullish forward guidance.

image of TSM semiconductor office building
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The company, commonly known as TSMC, said it earned $1.40 per share on revenue of $17.57 billion in the quarter ended March 31.

Wall Street analysts had expected TSMC to earn $1.27 a share on sales of $16.74 billion, according to data from FactSet.

What Happened With TSM Stock?

A year earlier, TSMC earned 95 cents a share on sales of $12.77 billion. Additionally, TSMC forecast revenue of $18.2 billion for the current second quarter, which is greater than the $17.33 billion that Wall Street had been looking for. Taiwan Semiconductor forecasts a gross profit margin of 56% to 58% in Q2, up from 55.6% in Q1.

The company said its earnings got a lift in the first quarter from shipments of 5-nanometer chips, which accounted for 20% of total wafer revenue. Advanced technologies, which include 7-nanometer chips, accounted for 50% of total wafer revenue.

Why It Matters

Taiwan Semiconductor’s earnings report is seen as positive not only for the company but for the entire chip sector, which has been struggling with huge demand and supply shortages over the past year. The chip shortage has hurt industries ranging from motor vehicles to smartphones.

Since hitting a record high of $145 in mid-January, TSM stock has declined by 30% to now trade at just under $100 per share. The stock has been pulled down by a broader downturn in technology securities, notably chip makers. Other semiconductor stocks, such as Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD), have also fallen in recent months.

What’s Next for TSMC

TSM stock should get a nice bump higher today following the company’s Q1 print. This will be welcome news to shareholders of Taiwan Semiconductor, as well as shareholders of other chipmakers such as Nvidia and AMD, who will be hoping for similar increases.

However, it remains to be seen if today will lead to substantial long-term gains for Taiwan Semiconductor’s stock. Investors should keep an eye on TSM stock.

On the date of publication, Joel Baglole held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.  

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.


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