Taiwan Semiconductor Manufacturing Company (TSM, Financial) is approaching all-time highs after posting strong Q4 results. The company, a key supplier for tech giants like Apple (AAPL, Financial) and NVIDIA (NVDA, Financial), reported significant revenue growth, driven by an unwavering demand for AI. In 2024, revenue from AI accelerators tripled year-over-year, and TSM expects this trend to continue, forecasting a doubling of revenue in 2025 from an impressive 2024 base.

• Q4 earnings rose by 55% year-over-year to $2.24, with sales climbing 37% to $26.88 billion.
• Revenue growth was broad-based, with HPC revenue up 19%, making up 53% of total revenue. Smartphone sales increased by 17%, while automotive sales grew by 6%.
• AI demand continues to be a major growth driver, with TSM forecasting a mid-40% CAGR in AI revenue over the next five years.
• Overall revenue growth is projected at a 20% CAGR over the next five years, following a 34% increase in 2024. TSM expects Q1 revenue of $25.0-25.8 billion and gross margins of 57-59%.

Despite strong Q4 results, the semiconductor sector is experiencing mixed reactions, contrasting with the broad strength seen after TSM's Q3 results. TSM anticipates mild growth in the PC and smartphone industries in 2025, reflecting ongoing economic challenges.

TSM remains optimistic, expecting short-lived headwinds in 2025. The company cites a shorter replacement cycle and increased AI functionality in devices as factors for continued growth, barring economic or geopolitical disruptions.