Taiwan Semiconductor Manufacturing Company (TSMC) has announced a remarkable 39% increase in quarterly revenue, alleviating concerns about a potential slowdown in AI hardware spending. For the September quarter, TSMC reported sales of NT$759.7 billion (approximately $23.6 billion), surpassing analysts’ expectations of NT$748 billion. The company will share its full results next Thursday.
This positive performance strengthens the optimism among investors betting on sustained AI spending as businesses and governments compete for a technological edge. However, some analysts caution that tech giants like Meta and Google’s parent company Alphabet may struggle to maintain their current levels of infrastructure investment without clear, profitable AI applications.
While there are concerns about potential delays in Nvidia’s latest Blackwell chip deliveries, most investors don’t see this as a long-term problem for TSMC. With competitors like Intel and Samsung facing challenges in custom chip manufacturing, TSMC’s leadership in the market is likely to support its profit margins.
Insights from Analysts
Charles Shum, a Bloomberg Intelligence analyst, noted that although orders for Apple’s A18 chip may dip due to lower demand for the new iPhone 16, robust orders from Nvidia and Intel are expected to offset any losses. Additionally, TSMC is preparing for early mass production of its 2-nanometer (N2) chips and plans to expand its advanced packaging capacity by 2025.
Currently, TSMC generates over half of its revenue from high-performance computing, a segment primarily driven by AI demand. The company remains the sole manufacturer of the iPhone processor, though some analysts express concerns about disappointing demand for the iPhone 16 lineup.
Hsinchu-based TSMC plays a crucial role in the global surge of AI investment, providing the advanced chips necessary for AI training. Its sales have more than doubled since 2020, largely fueled by the rise of AI technologies like ChatGPT, which sparked a rush for Nvidia hardware for AI server farms.
Following the announcement, Nvidia’s shares climbed about 1.1% in premarket trading, while TSMC’s U.S.-traded ADRs saw a modest 0.4% increase. Since ChatGPT’s launch, TSMC’s stock has more than doubled, with its market capitalization briefly surpassing $1 trillion in July. That same month, TSMC raised its revenue growth outlook for 2024 after posting strong quarterly results.
Future Outlook Amid Diverging Opinions
Despite recent skepticism regarding the sustainability of AI-driven growth, TSMC maintains a positive outlook on AI spending, even amid rising U.S.-China trade tensions. Companies across both countries, including Microsoft and Baidu, are investing heavily in AI infrastructure as they strive to develop innovative applications.
Hon Hai Precision Industry Co., a key server assembly partner for Nvidia, recently reaffirmed solid demand for AI hardware. Chairman Young Liu shared that the company plans to ramp up server production to meet the “crazy” demand for the next-generation Blackwell chips, echoing similar sentiments expressed by Nvidia CEO Jensen Huang earlier this month.
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