The dawn of artificial intelligence (AI) roughly three years ago has had a profound impact on the face of technology. Many experts claim that the advances brought by generative AI are ushering in the Fourth Industrial Revolution. In recent months, however, investors have become concerned that a slowdown will eventually hit AI, as hype has outpaced reality.
Taiwan Semiconductor Manufacturing (TSM 4.96%), commonly known as TSMC, reports monthly sales numbers, and the latest figures are eye-opening, helping to dispel any concerns about an AI slowdown. Investors celebrated the news, lifting the stock to a new all-time high.
Image source: Taiwan Semiconductor Manufacturing.
Highest ever
For the month of January, TSMC reported net revenue of NT$401.26 billion (roughly $12.7 billion), which climbed 37% year over year and 20% month over month. This marked the company's highest monthly revenue total ever, driven by ongoing demand for advanced AI chips.
TSMC is widely regarded as the most advanced semiconductor foundry and the world's leading contract chipmaker. The company dominates the space, with an estimated 71% of the global chip market, and more than 90% share of the most advanced chips used for AI. Because of its extensive reach in the industry, TSMC is also widely viewed as a bellwether, providing insight into the broader state of AI.
TSMC makes advanced semiconductors for some of the world's most high-profile companies, including Nvidia, Apple, Broadcom, and Advanced Micro Devices, among others.
NYSE: TSM
Key Data Points
The monthly sales results come on the heels of TSMC's blockbuster fourth-quarter financial report. The company's net revenue of $33.7 billion rose 26% year over year and 2% quarter over quarter, surpassing Wall Street's expectations and the high end of management's robust guidance. TSMC also saw expanding margins, as its gross margin of 62.3% and net profit margin of 48.3% hit their highest levels ever.
Management noted that chips for high-performance computing (HPC) have become the company's principal breadwinner, accounting for 58% of revenue last year. To keep up with the demand, TSMC plans to spend as much as $56 billion on capital expenditures in 2026, up 40% year over year at the high end of its guidance. CEO C.C. Wei said 70% to 80% of the spending would be earmarked for advanced process technologies.
At 34 times earnings, TSMC stock is trading at a premium. Still, as the leading provider of chips powering the AI revolution, the company is well-positioned to ride these secular tailwinds to new heights. That's why TSMC stock is a buy.
