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On the 17th of April, Taiwan Semiconductor Manufacturing Company (NYSE: TSM) – the principal foundry for both NVIDIA (NVDA) and AMD (AMD) chips – announced its Q1 results. By all accounts, the company did well with 839.25 billion New Taiwan dollars (NT$) in revenue versus expectations of NT$ 835.13 billion and a net income of NT$361.56 billion versus an expectation of NT$354.14 billion. However, the general investing public hasn’t been very enthusiastic about the stock over and above general market sentiment despite these solid earnings.
Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at
Source: Leverage Shares analysis
In fact, it displayed a near-constant underperformance relative to the broad market S&P 500 (SPX) both in the leadup to and after the earnings release.
Trend AnalysisThe first three months (3M) of its Fiscal Year (FY) 2025, the line item trends somewhat validate the forward guidance the company provides:
Source: Company Information; Leverage Shares analysis
If trends continue, FY 2025 will close out with a 16% increase in revenue and a 24% growth in diluted earnings per share. While it would be impressive in any other company in any other sector, this will be lower growth than in FY 2024, 2022 and – at least in revenue – 2021.
On the face of it, it seems that revenue passthroughs to earnings are getting more efficient:
Source: Company Information; Leverage Shares analysis
Cost of revenue as a percentage of revenue is close to being the low seen in 2022. As a result, gross profit is close to reaching the highs seen in 2022. Same goes for operating and net income.
Continued improvement may be somewhat impaired for a while going forward while the company builds out facilities in Dresden (Germany) and Arizona (U.S.) but it can be expected that workloads will be further balanced out between the different facilities it operates as these two come online.
Market ConvictionThere’s a rather interesting difference in conviction between the company’s U.S.-listed ticker and the Taiwan ticker « 2330 »:
Source: Leverage Shares analysis
Overall, investor conviction has been stronger on any given day in the U.S. ticker over the Taiwan ticker. However, investors in both countries have been united in direction, which has had a bearish tilt in 2025. Now, each U.S. tickers equals 5 Taiwanese stocks. When volumes are restated in Taiwanese stock terms, the difference in conviction becomes even more pronounced:
Source: Leverage Shares analysis
Note: The data is adjusted for trading holidays across either or both bourses.
On any given day, traded volume in the U.S. typically much stronger than in Taiwan – which lends a hand in the relatively enhanced valuation in the U.S. ticker.
Root Causes and ConclusionThe largest factor influencing market trajectories have been the ongoing tariff war essentially between the U.S. and the world, with China lying square in the crosshairs. China has long been a matter of bipartisan consensus and is unlikely to escape continued censure. In this regard, the company has expressed confidence that the tariff war is a matter of little concern; its exposure to China had declined to a single-digit percentage starting from Q4 2024.
Source: Company Information; Leverage Shares analysis
However, this is not the case with its prestigious client: Nvidia. With additional restrictions on the sales of its « slowed-down » China-specific H20 chips to Chinese buyers, Nvidia has stated that it will take a « quarterly charge »1 of $5.5 billion as a result.
However, as the article about Nvidia’s earnings in February2 outlined, Nvidia’s « China exposure » is likely highly understated due to « re-exports », i.e. products listed as being exported to a third country (most likely Singapore) are then shipped out to China. If export restrictions include closer scrutiny of re-export scenarios, then Nvidia might be in trouble.
Early trends in revenue growth possibly indicate that this is the beginning of the end of the Great AI Hype: while AI is here to stay, it isn’t necessarily translating to massive human labour substitutions while data center demand might be overstated, leading to possible corrections in the quarters to come. Plus, as the DeepSeek-centric article in March3 outlined, the successes of the « open-source » developers’ community imply that the industry is on the cusp of realizing that it is entirely possible for high accuracy to be achieved with lesser computation power with more efficient algorithmic design. In this context, it is entirely possible for Nvidia to pivot to sales of H20 chips to other parties unrelated to China. But demand for high-computing products might sag over the long run.
Absent hype and explosive growth, well-established semiconductor stocks such as TSMC will lose conviction without necessarily losing their place in the greater global economy. However, as the tariff war is highlight, a move to « de-globalize » or « de-centralize » would be in order: numerous foundries will rise in various parts of the world, oligopolies will shatter, and chip designers will continue to blossom. The tariff war simply makes this a more pressing matter, so it might happen sooner rather than later. TSMC too recognizes this: despite stating that a « shortage of labour » in Arizona4 is becoming a concern, it is pressing on with building out a $100 billion in capabilities square in the middle of its largest market: North America.
All in all, it may not be the best moment for « unexposed » investors to buy the stock. As recent trends indicate, it’s currently somewhat unlikely to deliver market-beating performance. On the other hand, there really isn’t a strong cause for long-term holders to divest just yet; the company pays a modest dividend while delivering essential products and services for the modern economy. The world is changing and so are the dynamics within; for now, the company is doing fine.
Professional investors in Europe might like to consider the +3x Long Taiwan Semiconductor ETP (TSM3) for magnified exposure during upticks of the stock’s trajectory while the -3x Short Taiwan Semiconductor ETP (TSMS) can be employed during downturns for magnified gains. Broad exposure to the semiconductor sector’s trajectory can also be considered via the +3x Long Semiconductors ETP (SMH3) during upsides and the -3x Short Semiconductors ETP (SMHS) during downsides.
Footnotes:
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