Huge News for Taiwan Semiconductor Stock Investors | TSM Stock Deep Dive Part 3

[00:00:00]We got some big news for Taiwan Semiconductor stock investors as the company reported their quarterly financial results. In part three of this deep dive, we're going to get an understanding of what this big news means for TS M stock investors.

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[00:00:24]>> But the company reported second quarter revenue of $40.2 billion and that was near the higher end of their guidance for the upcoming quarter's financial results. That means they provided investors with an outlook of what they thought they were going to report in this upcoming quarter. They provided a range and the results came towards the higher end of the range that they provided.

[00:00:47]Still, they're not being foolish about the current market environment. They observe consumers and the price-sensitive end market segment as being challenged due to the impact of rising component prices and macro econo- macroeconomic uncertainties and they are being prudent in their business planning.

[00:01:10]And I agree with their estimates of the consumer environment. So, if we exclude anything related to AI, right? And the investments in AI are kind of unrelated to consumer demand right now because most of the advancements in AI, most of the investments in AI companies are utilizing to improve efficiency, to cut cost, to improve productivity per employee and so the organization can become more efficient. It's not necessarily investment for the consumer market so consumers can buy something. So, even if consumers are not spending money and they're not buying as much and their budgets are constrained it's not really impacting AI investments because those investments are going towards categories like cost efficiencies, productivity enhancements, and so it's okay if consumer demand is not strong, and it's not really that strong, especially as a result of AI, it's creating higher component prices.

[00:02:14]And as you saw from Apple, and this is true with other manufacturers as well, they're raising prices on laptops, on personal computers, on tablets, on gaming devices, on smartphones, and that's resulting in consumers saying, "Wait a minute.

[00:02:31]The technology is the same.

[00:02:34]It's older, and now we're having to pay a higher price for that.

[00:02:39]Mm, no, thank you." And the higher price is not just like 5% more.

[00:02:44]Uh, a lot of times these devices that I mentioned already, the prices are up by 10, 15, 25, 30%.

[00:02:53]And so consumers are saying, "You know what? No, thank you." And we're seeing that, if you look at smartphone sales in the previous 3-month period, they're down year-over-year by a meaningful amount. If you look at PC sales compared to the same time last year, they're down year-over-year. If you look at gaming device sales, they're down year-over-year, unit-wise, right? People are spending more money, but they're not getting as much. They're spending more money for less, and that's true across the board, but more meaningfully in consumer electronics because of the soaring prices for memory and storage and everything else that's going into the similar components that are going into these areas. So, TSM is being prudent in their planning. They understand that part of the business is going to continue to be under pressure in 2026, and I didn't even talk about the macroeconomic uncertainties, the tariff pressure is adding to the cost already increasing, and then the war in Iran and the higher oil prices is adding several layers of negative impacts to consumers. On the one hand, they have less disposable income because they have to spend more in commuting and etc. And then on the other hand, the cost of everything is increasing because everything needs to be transported and you need oil and certain things that are being impacted negatively as a result of the closure of the Strait of Hormuz, and so that's creating higher cost and it's creating less disposable income, multiple categories of headwinds for consumers.

[00:04:36]Thankfully, anything related to artificial intelligence, the management team is highlighting continues to be extremely robust.

[00:04:45]And you might be wondering, how can this be? How can one part of the economy, the consumer, be under so much strain and yet anything related to AI continues to boom? And it's because of the factor I mentioned earlier.

[00:05:02]Investments in AI are not going towards consumers. They're not expecting consumers to spend money on AI. This is for businesses, for enterprises, and it's replacing something. It's lowering cost. It's replacing labor. And so it's allowing enterprises to do more with the same amount of people or to do the same amount of things with fewer people. It's a cost-saving initiative. And enterprises are willing to spend money to save cost. They're willing to spend money to improve efficiency because it improves the structural profitability of the business. It improves the competitive advantages of the business compared to the competition regardless of what's going on in the macroeconomic environment. So, this isn't like they're investing in a new product, a new smartphone, or a new computer that they plan to sell to customers.

[00:05:59]And given that the demand from customers is not strong, they're not going to invest as much.

[00:06:05]It's not that It's not that strongly correlated with consumer demand. So, that's how AI investment continues to remain extremely robust even though the other part of the consumer economy remains extremely constrained.

[00:06:19]So, a lot of interesting things here from Taiwan Semiconductor.

[00:06:23]Let's continue to the next part of the deep dive. That link is popping up on your screen. Click that link and I'll see you there soon.