Exploding demand for AI

TSMC (Taiwan Semiconductor Manufacturing Co), a maker of advanced chips used in AI applications with major customers such as Apple and Nvidia, has benefited from the surge toward artificial intelligence across many industries.

TSMC estimates that capital spending in the current quarter will double to about $11.5 billion (US), and the budget is likely to increase further next year, due to strong demand for the company's products. Full-year 2024 revenue will increase by nearly 30%, compared with a previous forecast of 20%.

TSMC's performance and outlook show strong demand for AI, after some industry watchers raised doubts about sales prospects.

TSMC said in its quarterly earnings report today (Oct. 17) that it expects capital spending this year to be slightly higher than $30 billion, potentially $32 billion, as it races to expand production. Capital spending for 2025 is likely to be higher than this year, but it did not provide specific numbers.

TSMC is spending tens of billions of dollars to build new factories overseas, including $65 billion for three plants in the US state of Arizona, although it has said most of its manufacturing will remain in Taiwan (China).

TSMC said it expects its first Arizona plant to reach high-volume production in 2025, while its second plant there will begin mass production in 2028. The company predicts its third Arizona plant will begin mass production by the end of the decade.

The Taiwanese chipmaker expects fourth-quarter revenue of $26.1 billion to $26.9 billion, up from $19.62 billion in the same period in 2023.

Record profits

The world's top chipmaker said net profit reached $10.11 billion for the quarter ended September 30, its highest for any quarter, compared with a forecast of about $9.5 billion from 22 analysts surveyed by LSEG SmartEstimate.

TSMC, Asia's most valuable listed company, reported a 36% year-on-year rise in third-quarter revenue to $23.5 billion, better than the company's previous forecast of $22.4 billion to $23.2 billion.

"Our business performance in the third quarter was buoyant due to strong demand related to smartphones and AI with leading 3nm and 5nm technologies. Moving into the fourth quarter, we expect continued improvement in revenue and profit due to strong demand for advanced technologies," said Wendell Huang, TSMC's CFO.

The second half of the year is traditionally peak season for Taiwanese tech companies, as they race to deliver to customers ahead of the holiday season in major Western markets.

TSMC said capital spending in the third quarter was $6.4 billion, compared with $6.36 billion in the second quarter.

The AI ​​boom has helped push TSMC's stock price up, with its Taipei-listed shares soaring 75% this year, compared with a 28% gain for the broader market, giving the company a market capitalization of about $840 billion.

TSMC faces little competition, although both Intel and Samsung are trying to challenge its dominance.