(Reuters) – Taiwan Semiconductor Manufacturing Co. has increased its revenue growth target for 2024 following better-than-expected quarterly results, easing concerns about global chip demand and the sustainability of the AI hardware boom.
The company, a key supplier to Nvidia Corp. and Apple Inc., now anticipates sales to rise by approximately 30% in US dollar terms this year, up from previous estimates of around a mid-20% increase. This adjustment comes after TSMC reported strong earnings for the September quarter. Additionally, it foresees capital expenditure to increase in 2025 from about $30 billion this year.
These positive developments should alleviate worries that investors may have miscalculated the demand for AI and semiconductors. Concerns arose after ASML Holding NV, a crucial player in the chip industry, surprised markets by reporting orders that were roughly half of what investors had expected. TSMC’s CEO C. C. Wei addressed these doubts on Thursday.
Wei stated, “The demand is real, and I believe it’s just the beginning.” He echoed sentiments shared by several executives, including Nvidia’s CEO, indicating that overall chip demand is stabilizing and beginning to improve.
TSMC’s shares surged over 6% in pre-market trading in New York, while Nvidia’s stock saw a 2.5% increase. Japanese chip gear makers, such as Lasertec Corp., recovered losses in Tokyo, and Infineon Technologies AG rose in Europe alongside other sector peers.
Throughout the year, TSMC’s shares have risen by more than 70%, outperforming many of Asia’s major tech companies due to robust sales of Nvidia chips crucial for AI development.
In July, Taiwan’s largest company had already raised its revenue outlook for 2024, indicating expectations for increased spending on AI infrastructure from companies like Microsoft Corp. and Amazon.com Inc. The consistent adoption of artificial intelligence is expected to drive sales of iPhones and other devices in the long term.
Despite these positive trends, investors closely monitored any deviations in TSMC’s outlook following ASML’s explanation that a slower recovery in the automotive, mobile, and PC markets had impacted chip plant expansion plans. However, AI remains a bright spot for the company.
Ben Barringer, a technology analyst at Quilter Cheviot, commented, “TSMC is not just an AI machine. They are much better positioned than both Intel and Samsung, which have had their own well-documented issues. TSMC has positioned itself well and should any real downturn hit the sector, it should be in a strong position to weather this and emerge in a good place.”
For the full article on TSMC’s earnings, click here.
On Thursday, TSMC reported a 54% increase in net profit for the September quarter, surpassing projections at NT$325.3 billion ($10.1 billion). The company anticipates revenue of $26.1 billion to $26.9 billion in the final quarter, exceeding estimates for $24.9 billion.
As the world’s largest producer of advanced chips, TSMC has greatly benefited from the global AI development race. Its shares have more than doubled since the AI boom began in late 2022 with the introduction of OpenAI’s ChatGPT. TSMC’s market capitalization briefly exceeded $1 trillion in the US.
Prior to ASML’s announcement, some investors had expressed caution regarding the trajectory of global AI spending, questioning whether tech giants like Meta Platforms Inc. and Alphabet Inc. would continue investing in chips and data centers without a breakthrough application.
Concerns about data center overcapacity and geopolitical issues have unsettled some investors. Reports emerged this week that Biden administration officials discussed imposing limits on sales of advanced AI chips from Nvidia and other American companies on a country-specific basis.
Wei indicated that revenue from AI server processors is expected to triple this year, comprising a mid-teens percentage of total sales in 2024.
In the long term, TSMC is focused on rapid international expansion, planning additional plants in Europe with an emphasis on the AI chip market. Construction is already underway in Japan, Arizona, and Germany.
–With contributions from Vlad Savov, Cindy Wang, Mayumi Negishi, Lianting Tu, and Henry Ren.
(Updates with Nvidia shares and analyst’s comment from the fifth paragraph.)
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