(Reuters) — Taiwan Semiconductor Manufacturing Co. reported a strong 39% increase in quarterly revenue, surpassing expectations and calming fears of a slowdown in AI hardware spending.
The leading chipmaker for Nvidia Corp. and Apple Inc. disclosed sales of NT$759.7 billion ($23.6 billion) for the September quarter, beating the projected NT$748 billion. The company will release its full results next week.
This impressive performance is likely to reassure investors who believe that AI spending will continue to rise as businesses and governments compete in the evolving technology landscape. However, some caution that companies like Meta Platforms Inc. and Alphabet Inc.’s Google may struggle to sustain their current level of infrastructure spending without a clear and profitable AI application.
Based in Hsinchu, TSMC plays a vital role in the global surge of AI development, producing cutting-edge chips essential for AI training. Sales have more than doubled since 2020, notably following the debut of ChatGPT, which triggered a rush for Nvidia hardware for AI server farms.
Nvidia’s shares rose by 1.1% in premarket trading in New York, while TSMC’s US-traded ADRs saw a more modest 0.4% increase.
Since the launch of ChatGPT, TSMC’s stock has more than doubled, briefly reaching a market cap of $1 trillion in July. The company also raised its 2024 revenue growth outlook after surpassing quarterly estimates.
There is a growing divergence in opinions regarding the sustainability of AI-driven growth. This skepticism has led to a retreat in AI stocks, including Nvidia, earlier this year.
TSMC remains optimistic about the future of AI spending despite escalating US-China trade tensions. Startups and tech firms in both countries, such as Microsoft Corp. and Baidu Inc., are investing heavily in AI infrastructure to develop innovative applications.
Hon Hai Precision Industry Co., Nvidia’s key server assembly partner, recently confirmed the continued strong demand for AI hardware. The company plans to increase server production capacity to meet the high demand for next-generation Blackwell chips, echoing statements from Nvidia’s CEO.
Although concerns about delays in Nvidia’s latest chips may disrupt the industry, most investors remain confident in TSMC’s long-term prospects. With Intel Corp. and Samsung Electronics Co. facing challenges in customized chip production, TSMC’s market leadership is expected to bolster margins.
According to Bloomberg Intelligence, while Apple’s A18 chip orders may decrease due to soft demand for the new iPhone 16s, strong orders from Nvidia and Intel could offset any revenue shortfall for TSMC. The company’s focus on 2-nanometer node mass production and plans to expand advanced packaging capacity in 2025 are also key topics of interest.
TSMC now generates over half of its revenue from high-performance computing driven by AI demand. It remains the exclusive processor manufacturer for the iPhone, although concerns about weaker-than-expected demand for the new iPhone 16 range persist.
(Stock reactions have been updated)
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