Why Taiwan Semiconductor Stock Raced Nearly 5% Higher Today

A pair of encouraging news items pushed chipmaking powerhouse Taiwan Semiconductor Manufacturing‘s (TSM 4.69%) stock notably higher on Wednesday. The company’s shares rose by almost 5% in price, handily beating the 0.8% increase of the bellwether S&P 500 index.

Taiwan Semi posted encouraging sales for January

The first item was Taiwan Semi’s latest monthly revenue report.

The company reported that it earned just under 216 billion new Taiwan dollars ($6.9 billion) in January, which was up significantly on both a sequential and an annual basis. The figure was 22% higher than the December 2023 tally and represented a nearly 8% year-over-year improvement.

That alone was a heartening development. Demand for chips remains high, particularly now that there’s an arms race in the tech sector to develop compelling artificial intelligence functionalities and apps. This plays very well into the hands of chipmakers like Taiwan Semi.

The second piece of news, divulged a bit earlier than the revenue update, is that a trio of top Japanese corporations is collaborating on an investment in one of the company’s business units in that country.

Sony Semiconductor Solutions, Toyota, and former Toyota-owned auto parts company Denso are investing in a second semiconductor factory for Japan Advanced Semiconductor Manufacturing (JASM). The latter company is majority-owned by Taiwan Semi. The overall investments into JASM’s two factories, located in Kumamoto Prefecture, should exceed $20 billion.

The right kind of company, in the right place

According to Taiwan Semi’s press release on the Kumamoto property’s investments, they will enjoy “strong support from the Japanese government.” Although it wasn’t entirely clear what was meant by that, it’s a sign that both big business and high officialdom in Asia are able and willing to bolster the continent’s chipmaking king.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

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