Net Profit Soars by 57%! TSMC's Latest Financial Report for Q4 2024 is Out! AI Is Still Booming!

Compared with the previous financial reports of US bank stocks, I pay more attention to TSMC's financial report. Because through this report, to some extent, we can get a glimpse of the situation in the AI industry.

TSMC held an investor conference on the 16th and announced its Q4 financial report.

The consolidated revenue was approximately NT$868.46 billion, the after-tax net profit was approximately NT$374.68 billion, and the earnings per share was NT$14.45.

The earnings per share in 2024 was NT$45.25, reaching a historical high.

TSMC pointed out that compared with the same period last year, the Q4 revenue in 2024 increased by 38.8%, and both the after-tax net profit and earnings per share increased by 57.0%.

Compared with the previous quarter, the Q4 revenue in 2024 increased by 14.3%, and the after-tax net profit increased by 15.2%.

In US dollar terms, the Q4 revenue in 2024 was $26.88 billion, an increase of 37.0% compared with the same period last year and a quarter-on-quarter increase of 14.4%; the gross profit margin was 59.0%, the operating profit margin was 49.0%, and the after-tax net profit margin was 43.1%.

This is a very good financial report. At the same time, I also went to check what Wei Zhejia, the chairman and CEO of TSMC, said about AI, which is also the part I am more concerned about.

In 2024, AI-related revenue accounted for about 15% of TSMC's revenue.

It is expected that with the strong growth of AI demand in 2025, this proportion will be doubled. And in the next five years (2025 - 2029), Wei Zhejia expects the annual compound growth rate of AI accelerator revenue to reach 40%, which will be the key driving force for revenue growth in the next few years.

Despite the financial report exceeding expectations and the quite good growth expectations for AI, the situation faced by TSMC may not be as good as imagined.

The current US chip control policies targeting China will greatly affect TSMC's revenue in 2025.

According to media reports, the US will announce more restrictions on chips sold to the Chinese mainland this week.

Just a few days before the Biden administration steps down, this time the target is chip manufacturers including TSMC.

The latest regulations will require TSMC, Samsung Electronics, and Intel to conduct stricter customer reviews and strengthen due diligence.

This is a response to the previous incident where chips produced by TSMC were secretly resold to the blacklisted Company H.

It is very likely that Company H refers to Huawei. (This is just my personal speculation)

The new regulations are expected to be announced as soon as Wednesday US time.

And these regulations will be based on the measures announced by the Biden administration on Monday to further strengthen global semiconductor controls.

The control measures announced on Monday have restricted high-end chip designers like NVIDIA from selling AI chips to data centers in most countries.

Sources informed Bloomberg that the new measures stipulate that all processes below 14nm (including 7nm, 5nm, and 3nm) will be additionally included in the global control list, and sales to the Chinese mainland and other relevant countries will require government approval.

So what proportion of TSMC's revenue do the processes below 14nm account for? Let's look back at TSMC's Q4 financial report again.

From this chart, we can see that the 3nm process technology accounted for 26% of revenue from wafers in this quarter, while 5nm and 7nm accounted for 34% and 14% respectively. So the processes below 14nm accounted for 74% of TSMC's total revenue from wafers.

For the whole year of 2024, the contribution of the 3nm process to the total revenue from wafers reached 18%, and the 5nm and 7nm processes contributed 34% and 17% respectively. The proportion of advanced processes in the total revenue from wafers increased from 58% in 2023 to 69%.

These advanced process technologies are popular in the market due to their high performance and low power consumption characteristics and have become an important driving force for TSMC's revenue growth.

However, with the introduction of new US control measures, TSMC will face stricter export restrictions, and the future outlook is worrying.

We also need to consider the complex situation of the ongoing stalemate in the Sino-US chip war. If the US cancels subsidies to TSMC or imposes heavy taxes, or even requires TSMC to set up more advanced process plants in the US, this will bring huge economic pressure and technical challenges to TSMC.

TSMC's stock is not very suitable for technical analysis. The biggest influencing factors are still its internal technological innovation and the competition between China and the US.

But one thing we also need to worry about is that after TSMC releases its financial report, the probability of its stock price falling may exceed that of rising.

The circles in the chart mark the days when TSMC released its financial reports. I only marked the data of the recent few times, but if you look further back, you will find that after each release of the financial report, TSMC's stock price will be near a phased high point, and after a period of decline, it will continue to rise.

I think this is what we investors need to pay attention to.

Next, the financial reports of Microsoft and Meta will also be released soon. Let's wait and see.

Whether the tech giants in the US stock market have enough performance to support their high stock prices and high valuations will be very interesting in the next one or two weeks.$TSM