(Bloomberg) — Taiwan Semiconductor Manufacturing Co. raised its 2024 revenue growth forecast after reporting quarterly results that beat expectations, reflecting confidence in the sustainability of the global AI spending boom.
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The chipmaker for Apple Inc. and Nvidia Corp. now expects revenue to grow more than the mid-20% maximum it had previously indicated. For the current quarter, TSMC is forecasting revenue of as much as $23.2 billion, topping analysts’ estimates. And it narrowed its capital spending forecast to the high end of its outlook to $30 billion to $32 billion, from just $28 billion previously.
The revisions underscore TSMC’s view that AI spending will remain strong despite growing trade tensions between the U.S. and China. In both countries, startups and technology companies from Microsoft Corp. to Baidu Inc. are pouring money into AI infrastructure, largely driven by Nvidia accelerators. TSMC’s U.S.-listed shares rose more than 3.6% in premarket trading.
Market expectations had risen in the weeks leading up to TSMC’s report. The broader smartphone market — another big driver for Taiwan’s largest company — is on the road to recovery. Apple gave suppliers an optimistic forecast for shipments of the upcoming iPhone 16, based on the potential power of its new AI services. That helped TSMC report a better-than-expected 36% jump in June-quarter profit.
“This time, the demand for AI is more real than it was two or three years ago,” TSMC Chief Executive Officer CC Wei said on an earnings call Thursday. The company is ramping up capacity to find the right balance. “Supply will remain very, very tight through 2025.”
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Net profit rose to NT$247.8 billion ($7.6 billion) after the company reported its second-quarter revenue grew at its fastest pace since 2022. High-performance computing, led by AI, accounted for 52% of TSMC’s revenue, the first time it has accounted for more than half of revenue.
The world’s largest maker of advanced chips is among the beneficiaries of a global race to secure semiconductors for artificial intelligence. Shares have more than doubled since the AI boom kicked off in late 2022 following the introduction of OpenAI’s ChatGPT, hitting a series of record highs as the company’s market cap briefly surpassed $1 trillion.
“The demand is so high, I have to work very hard to meet my customers’ demand,” Wei said. TSMC is testing customers’ chips and has found that the machine learning they enable is useful in boosting its own productivity, though it also has to queue up for scarce AI products, he said.
The company will likely hit its gross margin target of 53% or higher, Wei said. “My customers are doing well, so we should do well too,” he said.
What Bloomberg Intelligence Says
ASML’s 23.7% jump in order bookings in 2Q suggests that TSMC’s N2 development is progressing healthily, potentially accelerating capacity build-out. TSMC is scheduled to start mass production in 2H25, starting with a monthly capacity of around 30,000 wafers in Hsinchu, Taiwan. The N2 process will be at least 15% more expensive than N3 in our view.
— Charles Shum, BI Analyst
Investor euphoria over TSMC’s prospects has waned since Bloomberg Businessweek published comments from US Republican presidential candidate Donald Trump saying he is lukewarm at best about defending Taiwan in the event of Chinese aggression.
In addition, the Biden administration is considering imposing the toughest trade restrictions on some suppliers to Chinese chip companies, Bloomberg News reports. This has led to a global sell-off in technology stocks as investors wonder what the impact will be on the world’s largest semiconductor market.
Caution about AI is now creeping into corners of the market. This month, Goldman Sachs warned that the biggest U.S. tech companies may be spending too much on AI.
With profit growth slowing for many of the world’s largest technology companies, investors are focusing on how companies like utilities and data centers are investing capital in AI and whether those investments will boost profits and boost stock prices.
“AI trading is increasingly under scrutiny,” Goldman Sachs strategists Ryan Hammond and David Kostin said in a note this week.
–With assistance from Vlad Savov, Cindy Wang, Edwin Chan and Liau Y-Sing.
(Updates with comments from executives and analysts from the fifth paragraph)
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