AI Powers TSMC's Q4 Earnings Beat: ETFs to Tap

Taiwan Semiconductor Manufacturing TSM reported robust fourth-quarter 2024 results, wherein it beat estimates for both the top and the bottom lines on surging demand for advanced chips used in AI applications. This Taiwan-based chipmaker also offered a bullish outlook for AI demand.

Investors seeking to tap TSM’s growth could consider ETFs having the largest allocation to the world’s largest contract semiconductor manufacturer. These include SP Funds S&P World ex-US ETF SPWO, SP Funds S&P Global Technology ETF SPTE, VanEck Vectors Semiconductor ETF SMH, Matthews Emerging Markets ex China Active ETF MEMX and Global X Emerging Markets ex-China ETF EMM.

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Earnings in Focus

Taiwan Semiconductor reported earnings per ADR of $2.24, which outpaced the Zacks Consensus Estimate of $2.16 and improved 57% from the year-ago earnings. Revenues rose 37% year over year to $26.9 billion and were above the consensus estimate of $26.38 billion. TSMC’s high-performance computing division, which encompasses artificial intelligence and 5G applications, drove sales in the fourth quarter, contributing 53% of revenues. 

Taiwan Semiconductor, which makes chips for companies from Apple AAPL to NVIDIA NVDA, is benefiting from the global AI boom. TSM continues to benefit from the growing adoption of advanced chips for industry-leading 3-nanometer and 5-nanometer technologies. The 5-nanometer wafer accounted for 57% of total revenues, followed by the 3-nanometer wafer at 26% and the 7-nanometer wafer at 14% (read: Play TSMC's Best Year Since 1999 With These ETFs).

Management expects “AI accelerators to be the strongest driver of the high-performance computing platform growth and the largest contributor in terms of overall incremental revenue growth in the next several years.” For the first quarter of 2025, the company expects revenues of $25-$25.8 billion. The Zacks Consensus Estimate is pegged at $23.92 billion. TSMC also guided 2025 revenue growth in the mid-20s percentage range.

ETFs to Tap

Let’s delve into each ETF below:

SP Funds S&P World ex-US ETF (SPWO)

SP Funds S&P World ex-US ETF tracks the S&P DM Ex-U.S. & EM 50/50 Shariah Index, which is designed to measure the performance of sharia-compliant components of emerging market and developed market stocks, excluding U.S. stocks. It holds a basket of 383 stocks, with Taiwan Semiconductor taking the top spot at 17.5%. 

SP Funds S&P World ex-US ETF has accumulated $28.7 million in its asset base. It charges 55 bps in annual fees and trades in a lower average trading volume of 11,000 shares. SPWO has a Zacks ETF Rank #3 (Hold).

SP Funds S&P Global Technology ETF (SPTE)

SP Funds S&P Global Technology ETF focuses on large and mid-cap technology stocks from around the world, with a specific emphasis on companies pioneering in areas like e-commerce, cloud computing and healthcare technology. It follows the S&P Global 1200 Shariah Information Technology (Sector) Capped index and holds 99 stocks in its basket. Taiwan Semiconductor occupies the top position with a 17% share. 

SP Funds S&P Global Technology ETF has accumulated $45.1 million in its asset base and charges 55 bps in fees per year. It trades in a volume of 12,000 shares a day on average.

VanEck Vectors Semiconductor ETF (SMH)

VanEck Vectors Semiconductor ETF offers exposure to companies involved in semiconductor production and equipment. It follows the MVIS US Listed Semiconductor 25 Index, which tracks the most liquid companies in the industry based on market capitalization and trading volume. VanEck Vectors Semiconductor ETF holds 26 stocks in its basket, with Taiwan Semiconductor occupying the second position at 12.6%.  

VanEck Vectors Semiconductor ETF has managed assets worth $23.1 billion and charges 35 bps in annual fees and expenses. SMH trades in an average daily volume of 5 million shares and has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook (read: 4 ETF Sectors That Outperformed the S&P 500 Over the Past Five Years).

Matthews Emerging Markets ex China Active ETF (MEMX)

Matthews Emerging Markets ex China Active ETF seeks alpha in Global Emerging Markets ex China and capitalizes on consumption and innovation trends. It holds 67 stocks, with TSM being the top firm with a 15.2% share. 

Matthews Emerging Markets ex China Active ETF has AUM of $37.6 million and charges 79 bps in annual fees. It trades in a volume of 3,700 shares a day on average.

Global X Emerging Markets ex-China ETF (EMM)

Global X Emerging Markets ex-China ETF is an actively managed fund seeking to invest in emerging market companies, excluding China, that are believed to achieve or maintain a dominant position within their respective market. As part of its investment strategy, EMM aims to identify early winners in growing industries where entrepreneurship can produce long-term global competitiveness. Global X Emerging Markets ex-China ETF holds 71 stocks in its basket, with Taiwan Semiconductor taking the top position at 10.5% share. 

Global X Emerging Markets ex-China ETF has AUM of $24.1 million and charges 75 bps in annual fees. It trades in a volume of 3,000 shares a day on average.

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