Chipmaker TSMC’s shares jump after quarterly profit beats estimates

TSMC shares jumped 3.7% on Friday outperforming the broader market, after the Taiwanese chipmaker announced forecast-beating second-quarter profit, with analysts buoyant on the firm’s outlook despite some downside concern.

Taiwan Semiconductor Manufacturing Co Ltd (TSMC), a major Apple Inc supplier and the world’s largest contract chipmaker, posted a 76.4% leap in profit for the April-June period of 2022, to T$237.0 billion ($7.92 billion).

It said it was “highly confident” about its long-term prospects, though also signalled cooling demand from consumer electronics customers who it expects to reduce chip stockpiles over the next few quarters into 2023.

The market has been wary of a possible chip glut due to slowing consumer demand and soaring inflation, especially after Micron Technology Inc last month said a chip shortage in some sectors was quickly turning into a glut.

TSMC’s earnings are likely to ease some of those worries for now.

Analysts at J.P. Morgan said TSMC acknowledging the downturn was a “positive start”, expecting the chipmaker’s stock price to move up modestly in the near term.

“But confirmation of downturn from other semi companies in this earnings season is necessary for a definitive clearing event.”

TSMC’s shares are still down around 20% so far this year, in line with broader local market, as investors worry Taiwan’s export-dependent economy will be hit by inflation and slowing consumer demand in China, the United States and Europe.

Morningstar analysts said they believed Qualcomm Inc and Nvidia Corp’s increased allocation to TSMC would have cushioned the impact of most of the overall softened demand for the next 12 months.

“We note that the duo has contracted TSMC as their primary foundry (if not sole) for most of 2023’s consumer products because of low production yields at Samsung” Electronics Co Ltd.