Taiwan Semiconductor Earnings: Catalyst for a Breakout?
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Taiwan Semiconductor Manufacturing Company Ltd. (Ticker: TSM), the world’s leading contract chipmaker, is set to release its fourth-quarter earnings in the coming weeks. The quarterly update could be one of the next key catalysts for the closely watched stock and overall semiconductor sector.
Wall Street analysts are looking for earnings per share (EPS)* of $2.19 compared with $1.46 in the year-ago quarter when TSM reports earnings, which are expected to cross around January 16, according to TipRanks. These results will provide a key update on how TSM is managing demand for its cutting-edge chips in the burgeoning artificial intelligence (AI) market.
Over the past year, TSM’s stock has nearly doubled, reflecting investor confidence in its leadership within the semiconductor space. Recently, though, it’s been stuck in a range around the 50-day moving average*. Whether the stock can break out or will bump against resistance is a key question for traders.
Below is a daily chart of TSM, as of December 13, 2024.
Source: StockCharts.com, December 13, 2024.
Candlestick charts display the high and low (the stick) and the open and close price (the body) of a security for a specific period. If the body is filled, it means the close was lower than the open. If the body is empty, it means the close was higher than the open.
The performance data quoted represents past performance. Past performance does not guarantee future results.
The stock remains a favorite among investors due to TSM’s crucial role in the AI revolution. Analysts from Investors Business Daily emphasize its competitive edge as a provider of advanced chips for clients like Nvidia Corporation (Ticker: NVDA) and Broadcom Inc. (Ticker: AVGO).
A Mixed Picture for AI Chip Sales
In November 2024, TSM reported a 34% year-over-year increase in sales, reaching $8.48 billion. This surge was driven by robust demand for semiconductors used in AI applications, particularly those designed by Nvidia. However, this marked a 12.2% decline from October revenues, raising concerns about short-term demand trends, according to Investopedia.
For the third quarter, TSM outperformed expectations, reporting $23.62 billion in revenue, up 36.5% year-over-year. This was largely attributed to rising demand for AI-related chips, a trend that continues to anchor TSM’s market dominance, according to Investors Business Daily.
Traders will be watching closely for the latest sales trends when TSM reports earnings in mid-January, and TSM’s stock could move along with the broader chip sector on the results.
Potential Partnership Updates
Investors will also be looking for any updates on how TSM has benefited from its partnerships with major clients like Apple Inc. (Ticker: AAPL) and Nvidia Corporation (Ticker: NVDA). These companies rely on TSM’s advanced manufacturing capabilities for the production of high-performance chips used in AI and other applications, as highlighted by The Motley Fool.
The AI boom, spurred by applications such as ChatGPT, has amplified demand for cutting-edge semiconductors, boosting TSM’s revenue streams. Given that, Wall Street analysts will be keen to hear the company’s sales expectations.
Geopolitical Risks and Outlook
TSM operates against a backdrop of complex geopolitical dynamics, particularly tensions between the U.S. and China. Navigating these challenges remains a critical aspect of the company’s strategic planning, according to Barron’s. Tariffs, trade restrictions, and the push for domestic semiconductor production in the U.S. are key factors that could shape its financial outlook under the Trump administration.
Looking forward, TSM is poised to likely continue benefiting from the growth in AI and high-performance computing applications. Its advanced manufacturing processes and strong client relationships may well position it for long-term success. However, it must remain vigilant in addressing geopolitical risks and maintaining its technological lead.
In summary, TSM’s upcoming earnings report should provide crucial insights into its ability to sustain growth amid dynamic market conditions and global challenges. Investors will watch closely to see if TSM can maintain its leadership in the rapidly evolving semiconductor industry.
Trading TSM Stock with Leverage or Inverse
For traders looking to trade TSM’s upcoming earnings report as a potential catalyst, the Direxion Daily TSM Bull 2X Shares (Ticker: TSMX) and Direxion Daily TSM Bear 1X Shares (Ticker: TSMZ) seek daily investment results, before fees and expenses, of 200%, or 100% of the inverse (or opposite), respectively, of the performance of the common shares of Taiwan Semiconductor Manufacturing Company Ltd. (Ticker: TSM).
*Definitions and Index Descriptions
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The Funds have derived all disclosures contained in this document regarding Taiwan Semiconductor Manufacturing Company Ltd. from publicly available documents. In connection with the offering of each Fund’s securities, neither the Funds, the Trust, nor the Adviser or any of its respective affiliates has participated in the preparation of such documents. Neither the Funds, the Trust nor the Adviser or any of its respective affiliates makes any representation that such publicly available documents or any other publicly available information regarding Taiwan Semiconductor Manufacturing Company Ltd. is accurate or complete. Furthermore, the Funds cannot give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available documents described above) that would affect the trading price of Taiwan Semiconductor Manufacturing Company Ltd. have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning Taiwan Semiconductor Manufacturing Company Ltd. could affect the value of a Fund’s investments with respect to Taiwan Semiconductor Manufacturing Company Ltd. and therefore the value of the Funds.
Direxion Shares Risks – An investment in a Fund involves risk, including the possible loss of principal. Each Fund is non-diversified and includes risks associated with a Fund concentrating its investments in a particular security, industry, sector, or geographic region which can result in increased volatility. A Fund’s investments in derivatives such as futures contracts and swaps may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including imperfect correlations with underlying investments or the Fund’s other portfolio holdings, higher price volatility and lack of availability. As a result, the value of an investment in a Fund may change quickly and without warning.
Leverage Risk – The Bull Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. A total loss may occur in a single day. Leverage will also have the effect of magnifying any differences in the Fund’s correlation with TSM and may increase the volatility of the Bull Fund.
Daily Correlation Risk – A number of factors may affect the Bull Fund’s ability to achieve a high degree of correlation with TSM and therefore achieve its daily leveraged investment objective. The Bull Fund’s exposure to TSM is impacted by TSM’s movement. Because of this, it is unlikely that the Bull Fund will be perfectly exposed to TSM at the end of each day. The possibility of the Bull Fund being materially over- or under-exposed to TSM increases on days when TSM is volatile near the close of the trading day.
Daily Inverse Correlation Risk – A number of factors may affect the Bear Fund’s ability to achieve a high degree of inverse correlation with TSM and therefore achieve its daily inverse investment objective. The Bear Fund’s exposure to TSM is impacted by TSM’s movement. Because of this, it is unlikely that the Bear Fund will be perfectly exposed to TSM at the end of each day. The possibility of the Bear Fund being materially over- or under-exposed to TSM increases on days when TSM is volatile near the close of the trading day.
Taiwan Semiconductor Manufacturing Co., Ltd. Investing Risk – TSM faces risks associated with the highly competitive nature of the semiconductor industry; economic and market uncertainty; reductions in demand for its products; potential concentration of revenues in a few large clients as among other risks.
Semiconductor Industry Risk – Semiconductor companies may face intense competition, both domestically and internationally, may have limited product lines, markets, financial resources or personnel and may face risks related to the availability of materials.
Technology Sector Risk — The market prices of technology-related securities tend to exhibit a greater degree of market risk and sharp price fluctuations than other types of securities.
Additional risks of each Fund include Effects of Compounding and Market Volatility Risk, Derivatives Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Industry Concentration Risk, Market Risk, Indirect Investment Risk, and Cash Transaction Risk. Additionally, for the Direxion Daily TSM Bear 1X Shares, Shorting or Inverse Risk. Please see the summary and full prospectuses for a more complete description of these and other risks of a Fund.