Why Did Taiwan Semiconductor Stock Rise 15% Last Month?

The world’s largest microchip manufacturer continues to ride higher on the AI boom.

Shares of Taiwan Semiconductor (TSM 0.82%), also known as TSMC, climbed 15.4% in June, according to data provided by S&P Global Market Intelligence. The stock climbed thanks to impressive monthly sales data and bullish news from other companies in the semiconductor industry.

TSMC reported impressive monthly sales figures

TSMC is one of the few publicly traded companies that provides monthly financial data. On June 7, the company reported $7.3 billion of May revenue. That was a 2.7% decrease from April, but it still represented 30% growth over the prior year. It was the third-highest monthly sales figure in the company’s history.

An engineer wearing rubber gloves looking at a microchip through a magnifying glass.

Image source: Getty Images.

The news was welcomed by analysts, who attributed the performance to strong demand from artificial intelligence (AI) applications. The May results suggest that the company is on pace to meet its second-quarter forecasts, and it might even be ahead of schedule.

TSMC is benefiting from powerful industry-wide catalysts

TSMC designs and manufactures chips for other semiconductor companies. Its list of customers includes many of the largest businesses in the semi industry, including Apple, Nvidia, Intel, Broadcom, AMD, and Qualcomm.

That’s a comprehensive list of high-profile leaders in the microchip sector, so TSMC’s performance tends to reflect industry-wide catalysts. The stock can also move higher whenever one of its major customers reports good news. Both of those factors were in play last month.

The iShares Semiconductor ETF is up nearly 50% over the past 12 months. The microchip industry is notoriously cyclical. Inventory rises and falls while new generations of chips replace aging products heading for obsolescence. The industry emerged from a cyclical downturn last year, propelled by surging demand for hardware to support AI and other advanced computing.

SOXX Chart

SOXX data by YCharts

The AI boom has been important for software stocks like Microsoft, but it’s also delivered favorable conditions for the vendors upstream in the supply chain, like TSMC. Automation and machine learning require computing power and efficiency that aren’t available from previous generations of chips, and semiconductor manufacturers are rushing to meet demand.

TSMC’s correlation with its biggest customers is clear. The stock’s price chart illustrates shared performance compared to Apple, Nvidia, and Broadcom. Taiwan Semi’s impressive monthly sales, combined with Broadcom’s better-than-expected quarterly results, should keep investors excited about semiconductor demand.

TSM Chart

TSM data by YCharts

This cycle will inevitably weaken at some point, but it doesn’t seem like that’s happening anytime soon. AI demand is likely to stay robust for at least a few quarters to come. Even if one of TSMC’s largest customers falters, there’s a good chance that the company is the manufacturing partner for whichever chipmaker fills the gap.

Ryan Downie has positions in Microsoft, Nvidia, and Qualcomm. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Microsoft, Nvidia, Qualcomm, Taiwan Semiconductor Manufacturing, and iShares Trust – iShares Semiconductor ETF. The Motley Fool recommends Broadcom and Intel and recommends the following options: long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short August 2024 $35 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

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