The company’s sales data confirms a recovery is in place for the semiconductor industry.
Shares in Taiwan Semiconductor Manufacturing Co. (TSM 1.83%) rose by 12.9% in March, according to data provided by S&P Global Market Intelligence. The move comes in a highly eventful period for the company.
Earthquakes in Taiwan, the announcement of a major expansion in Arizona, and the news that its rival and customer, Intel, is suffering multibillion-dollar losses in its foundry business have all hit the newswires recently.
Taiwan Semiconductor sails serenely on
While these events hit the headlines, it’s easy to forget that the semiconductor market is recovering this year. The good news is that Taiwan Semiconductor’s monthly sales data confirms that. For reference, the data for February was released in March.
For example, here’s a look at its year-over-year change in monthly sales. As the chart demonstrates, after almost 10 months of year-over-year declines, the company’s sales turned positive in January and February. Also, note that the first two months of 2023 were positive, implying that the positive results in the first two months of 2024 are even stronger than they appear initially.
Data source: Taiwan Semiconductor Manufacturing Company presentations. Chart by author.
As such, don’t be surprised if the March and April data are very strong. Those two months were weak last year, so the comparisons should be easier.
A stock to buy?
The company’s sales data is positive, and the problems at Intel highlight how difficult it is to establish a profitable foundry business. The CHIPS Act continues to support investment in the industry (as it did with the Arizona expansion for Taiwan Semiconductor).
Image source: Getty Images.
Meanwhile, ongoing demand from investment in artificial intelligence (AI) applications continues to drive semiconductor sales while the industry waits for a cyclical upturn in consumer electronics.
Clearly, the industry is back in growth mode, and Taiwan Semiconductor is ideally placed to benefit from it. That’s why investors backed the stock in March.
Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
