TSMC pops on Q4 earnings beat
Speakers
Kristina Partsinevelos
— Markets Reporter, CNBC
Summary
Kristina Partsinevelos discusses TSMC's strong Q4 earnings, which beat expectations and signaled genuine AI demand. TSMC reported over $100 billion in annual revenue, intact margins, and plans for significantly higher capex over the next three years. The report boosted chip stocks, with ASML hitting a $500 billion market cap, and equipment makers expected to benefit. Smartphone sales held up, supporting Apple's narrative.
- TSMC beat Q4 earnings and said AI demand is genuine.
- TSMC surpassed $100 billion annual revenue; margins intact and improving.
- Next three years of capex to be significantly higher, signaling AI cycle continues.
- TSMC sold out for fiscal 2026 with customer timelines extending 2-3 years.
- Chip equipment makers like ASML, Teradyne, and Onto Innovation benefit from TSMC spending.
- ASML up over 5%, hit $500 billion market cap for first time.
- Smartphone sales held up, strengthening Apple's Q1 narrative.
- Intel competition question: TSMC management said Intel is not a competitor.
Ideas
TSMC earnings beat on genuine AI demand.
TSMC reported a strong Q4 earnings beat, with management saying AI demand is genuine and cloud providers are seeing strong financial returns. The company surpassed $100 billion in annual revenue for the first time, margins are intact and long-term margins are improving, and capex over the next three years will be significantly higher than the last three years combined. TSMC is also completely sold out for fiscal 2026 with customer engagement timelines extending 2-3 years, implying strong ongoing demand from NVIDIA, AMD, and Broadcom, while smartphone sales held up.
AI cycle is nowhere near over.
TSMC's plans for significantly higher capex over the next three years, roughly $100 billion, and its sold-out capacity for fiscal 2026 indicate that the AI cycle is nowhere near over. The equipment spending now will support production well beyond the next three years, which is a very bullish sign for the broader AI semiconductor supply chain.
TSMC capex benefits chip equipment makers.
When TSMC spends on capex, chip equipment makers like Teradyne, Onto Innovation, and ASML reap the benefits. ASML's equipment is extremely expensive and takes years to build and install, so production from equipment bought now will not come online until 2028 and will benefit the company well beyond that point. ASML is up 25% year-to-date, showing demand in the sector.
Smartphone sales held up, aiding Apple.
TSMC's earnings report showed that smartphone sales held up, which strengthens Apple's narrative at least for the first quarter of this year.
