TSMC: Demand Outlook Offsets Likely Peak In Gross Margins
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TSMC plans to increase its FY25 capital expenditure by 34%, driven by strong AI-related demand and the N2 process node's ramp-up. While gross margins may peak due to capacity expansion, structural improvements in productivity and utilization are expected. TSMC's discount compared to peers has slightly widened since the Q4 FY24 earnings release.
January 21, 2025 | 4:45 pm
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TSMC is increasing its FY25 capex by 34% due to strong AI demand and the N2 process node ramp-up. While gross margins may peak, productivity and utilization improvements are expected. TSMC's discount to peers has widened slightly.
The increase in capex indicates strong demand, particularly from AI-related sectors, which is positive for TSMC's future revenue growth. Although gross margins may peak due to capacity expansion, the structural improvements in productivity and utilization are likely to offset this. The slight widening of TSMC's discount to peers suggests a potential undervaluation, which could attract investors.
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