(Bloomberg) — Taiwan Semiconductor Manufacturing Co. raised its target for 2024 revenue growth after quarterly results beat estimates, allaying concerns about global chip demand and the sustainability of an AI hardware boom.
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The main chipmaker to Nvidia Corp. and Apple Inc. now expects sales to climb about 30% in US dollar terms this year, up from previous projections for about a mid-20% rise. That’s after TSMC reported better-than-predicted earnings for the September quarter. And it foresees capital expenditure rising in 2025 from roughly $30 billion this year.
TSMC’s outlook should help tamp down concerns that investors mis-judged the AI and semiconductor demand. Those fears crystallized after chip industry linchpin ASML Holding NV stunned markets by reporting about half the orders investors had expected. On Thursday, Chief Executive Officer C. C. Wei sought to dispel those doubts. Shares of the company trading on Tradegate gained 7.4% versus their last close on the German exchange.
Shares of Japanese chip gear makers including Lasertec Corp. pared losses in Tokyo, while Infineon Technologies AG rose in Europe alongside sector peers.
“The demand is real and I believe it’s just the beginning,” Wei said, echoing a number of executives including Nvidia Corp.’s CEO. In terms of overall chip demand, “everything’s stabilized and start to improve.”
TSMC’s shares have surged more than 70% this year, outpacing many of Asia’s biggest tech firms in a reflection of strong sales of the Nvidia chips vital to artificial intelligence development.
For a liveblog on TSMC’s earnings, click here.
Taiwan’s largest company had raised its outlook for 2024 revenue just a few months ago in July, underscoring expectations for spending on AI infrastructure from the likes of Microsoft Corp. and Amazon.com Inc. Steady adoption of artificial intelligence should also help fuel sales of iPhones and other gadgets in the long run.
Still, investors had watched for deviations in TSMC’s outlook after ASML blamed slower-than-expected recovery in the automotive, mobile and PC markets, impacting expansion plans for chip plants. AI remains a bright spot, its executives said.
On Thursday, TSMC reported a better-than-projected 54% rise in September-quarter net profit to NT$325.3 billion ($10.1 billion). And it expects revenue of $26.1 billion to $26.9 billion in the final quarter, beating an estimate for $24.9 billion.
While official trading of the company’s American depositary receipts won’t begin for a while, the ADRs were up about 4.5% on Robinhood’s overnight trading platform. TSMC is popular among US retail investors seeking to bet on the AI theme.
What Bloomberg Intelligence Says
TSMC’s guidance of a 57%+ gross margin, which surpasses consensus, coupled with a fast ramp-up of N3 nodes, indicating continuous robust high-performance computing chips, like AI training chip, production demand from Nvidia and others. This aligns with our expectations. Sales growth should be able to exceed 25% in 2025, supported by strong AI chip demand and TSMC’s leadership in 3- and 5-nm nodes, alongside advanced CoWoS packaging.
– Charles Shum, analyst
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The world’s largest maker of advanced chips has been one of the biggest beneficiaries of a global race to develop artificial intelligence. Its shares have more than doubled since that boom took off in late 2022 with the debut of OpenAI’s ChatGPT. TSMC’s market capitalization briefly crossed the $1 trillion mark in the US.
Yet even before ASML, some investors have grown cautious about the trajectory of global AI spending. They question whether big tech firms like Meta Platforms Inc. and Alphabet Inc. will continue to splash out on AI chips and data centers without a truly killer AI application.
The risks of data center over-capacity and geopolitical issues have unnerved some investors. Bloomberg reported this week that Biden administration officials have discussed capping sales of advanced AI chips from Nvidia and other American companies on a country-specific basis.
On Thursday, Wei said he expects revenue from AI server processors to more than triple this year, yielding a mid-teens percentage of total sales in 2024.
Longer-term, TSMC is pursuing a rapid international expansion.
It’s planning more plants in Europe with a focus on the market for artificial intelligence chips, according to a senior Taiwanese official. That’s on top of construction underway in Japan, Arizona and Germany.
–With assistance from Vlad Savov, Cindy Wang, Mayumi Negishi and Lianting Tu.
(Updates with shares and executives’ comments from the fourth paragraph.)
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