TSMC’s July Surge Raises the Bar for Nvidia’s Foundry

This article first appeared on GuruFocus.

Taiwan Semiconductor Manufacturing (NYSE:TSM), the world’s largest contract chipmaker, traded at $415.66 Wednesday after reporting July revenue of NT$467.58 billion. That was a massive 44.7% leap from one year earlier. The AI foundry machine is still running hot, but Nvidia’s results must show that chip demand can keep pace.

The numbers leave little room for doubt. Revenue across the first seven months soared 37% to NT$2.872 trillion. TSMC’s second-quarter results added $40.2 billion in sales, a towering 67.7% gross margin and a 60.3% operating margin. Management now expects third-quarter revenue of $44.6 billion to $45.8 billion. The $45.2 billion midpoint points to another 12.4% sequential jump.

But the stock price already demands excellence. At $415.66, the shares trade 30.24% above their $319.14 GF Value. That premium says investors expect advanced-node production, AI accelerators and high-end packaging to stay red-hot. TSMC has built the capacity. Customers must fill it. One soft demand signal could hit hard when this much growth is already priced in.