Fund Manager sees ‘outsized growth opportunity’ in TSMC despite a hit to profit in Q2

Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM) says its profit declined in the second quarter for the first time in four years. Shares of semiconductor behemoth ended about 5.0% down today.   

Rising focus on AI will benefit TSMC

The multinational attributed the hit to continued weakness in consumer electronics demand due to macroeconomic headwinds and issued somewhat of a downbeat guidance for its current quarter as well.

TSMC expects its revenue to climb and come in between $16.7 billion and $17.5 billion in Q3. But gross margin, it warned in a press release, will contract further to about 52.5%.

Still, Richard Clode – Fund Manager at Janus Henderson Investors remains bullish on Taiwan Semiconductor as he expects its premium 3-nanometre chip to play a pivotal role in artificial intelligence.

Key takeaways from TSMC Q2 results

• Net income printed at $5.85 billion versus $7.6 billion a year ago
• Earnings per American depositary share came in at $1.14
• Revenue sunk 10% on a year-over-year basis to $15.68 billion
• Consensus was $1.07 a share on $15.45 billion in revenue
• Smartphone revenue tanked 9.0% versus the same quarter last year
• High-performance computing revenue also dropped 5.0%

Most notably, the Hsinchu-headquartered firm makes chips for the Apple iPhone. Nvidia also depends on it to manufacture the GPUs.

Gross margin took a hit in the second quarter

TSMC said gross margin stood at 54.1% in its recently concluded quarter – down 220 basis points sequentially and 500 basis points versus last year. Still, Clode told CNBC today:

Also on Thursday, Taiwan Semiconductor delayed production at its new factory in Arizona citing not enough skilled labour.

TSMC shares are up more than 30% for the year at writing.