Nvidia Supplier TSMC Tops Q1 Estimates On AI-Fueled Demand, Offers Strong Outlook: Retail Stays Cautiously Optimistic

Chip foundry Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) reported better-than-expected first-quarter results, buoyed by strong artificial intelligence (AI)-related demand and issued an upbeat guidance. 

Hsinchu, Taiwan-based TSMC reported earnings per share (EPS) of $2.12 (NT $13.94) and net revenue of $25.53 billion (NT $839.25) for the first quarter of 2025. The topline aligned with the $25 billion to $25.8 billion guidance the company issued in mid-January.

The headline numbers marked an increase from the year-ago quarter's $1.38 and $18.87 billion but a drop from the previous quarter's $2.24 and $26.88 billion.

Koyfin's consensus estimates modeled EPS and revenue of NT $13.54 and NT $836.61 billion, respectively.

The most advanced 3-nm processors accounted for 22% of the total wafer revenue; 5-nm and 7-nm made up 36% and 15%, respectively.

TSMC said its first-quarter gross and operating margins were 58.8% and 48.5%, respectively, down slightly from 59% and 49%, respectively, in the fourth quarter, but aligned with the guidance.

The company attributed the sequential revenue drop to smartphone seasonality, which was partially offset by AI-related demand. 

Product-wise, high-performance computing accounted for 59% of the revenue, while smartphones made up 28%.

Geographically, North America contributed 77% of the total revenue. The company supplies chips to major tech companies including Nvidia (NVDA) and Apple (AAPL).

During the quarter, the company announced plans to invest about $165 billion in the U.S., primarily to meet AI-related demand.

The move is widely seen as an attempt to align with President Donald Trump's "America First" vision. The Trump administration announced steep 32% import tariffs on Taiwan before pausing the implementation to provide time for bilateral trade negotiations.

Looking ahead, TSMC guided to second-quarter revenue of $28.4 billion to $29.2 billion, assuming an exchange rate of NT $32.5 a dollar. This translates to revenue of NT $923 billion to NT $949 billion in local currency compared to the consensus of NT $885.32 billion.

The company expects gross and operating margins in the range of 57%-59%, and 47%-49%, respectively.

Senior VP and CFO Wendell Huang  said, “Moving into second quarter 2025, we expect our business to be supported by strong demand for our industry-leading 3nm and 5nm technologies. 

“While we have not seen any changes in our customers’ behavior so far, uncertainties and risks from the potential impact from tariff policies exist.”

On Stocktwits, retail sentiment toward TSMC stock was 'extremely bullish' (80/100) by late Wednesday, with the buoyant mood accompanied by 'extremely high' message volume.

A bullish watcher lauded the company for a great earnings report and saw a move up to at least the $160 level.

Another user, acknowledging that the numbers were good, said they were wary of tariffs.

TSMC stock ended Wednesday's session down 3.60% at $151.67 amid the sell-off triggered by new China chip restrictions.

The stock has lost about 23% this year.

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