[Click eStock] Factors to Consider When Investing in TSMC

Although TSMC's stock price has undergone a correction, analysts have concluded that there are no issues with its fundamentals. However, for the share price to turn around, both the continued growth of the cloud sector and the sustainability of capital expenditures need to be ensured.

On July 21, Jaehwan Park, an analyst at Eugene Investment & Securities, stated, "Despite a more than 7% drop in the stock price after the earnings announcement, there has been no meaningful deterioration in TSMC's performance or investment highlight."

Analyst Park explained, "The current correction is more influenced by sentiment stemming from concerns over end-market demand than by fundamentals. For a turnaround in the sector's stock prices, a robust cloud growth rate and the sustainability of capital expenditures need to be reaffirmed in the upcoming earnings reports from hyperscalers."

In the second quarter of this year, revenue reached $40.2 billion, up 34% from the same period a year earlier, with a gross margin of 67.7%. The company's third quarter revenue guidance is set at $45.2 billion, a 37% increase from the same period last year, fueling strong expectations for continued growth. Analyst Park noted, "Demand for semiconductors for artificial intelligence (AI) data centers remains solid. The growing demand for graphics processing units (GPUs) and central processing units (CPUs) driven by the expansion of agentic AI is positive for TSMC's advanced wafer business."

He added, "TSMC is maintaining a conservative stance in its wafer pricing policy, which raises concerns about stagnant profitability. However, with strong inflation across the AI sub-value chain led by memory products, TSMC has chosen a strategy to maintain sustainable margins with clients, thereby securing long-term growth potential."

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