TSMC Reports Better-Than-Expected Outlook Thanks to Surging AI Demand

Taiwan Semiconductor Manufacturing Co. is expecting revenue to increase by up to 30% in the current quarter due to a surge in AI development driving demand for advanced chips. This positive outlook comes after the company reported its first profit increase in a year, with strong AI demand fueling growth at the world’s largest contract chipmaker. The company, a major supplier to Nvidia and Apple, anticipates revenue of $19.6 billion to $20.4 billion for the June quarter, surpassing estimates.

Last week, Taiwan’s largest company saw its fastest sales growth since 2022, indicating that demand for chips that accelerate AI development is starting to offset the impact of a decline in the smartphone market. Apple, which contributed around a quarter of TSMC’s revenue in 2023, experienced a significant drop in Chinese iPhone sales at the beginning of the year.

TSMC’s market value has surged by $340 billion since October 2022, fueled by expectations that it will emerge as a key beneficiary of the global AI development boom. The company earmarked a capital expenditure budget of $28 billion to $32 billion for 2024 and reported a 9% increase in net income to NT$225.5 billion ($7 billion) for the March quarter. Despite predicting revenue growth of at least 20% for the year, TSMC acknowledges the uncertainty due to global economic volatility.

Investors are betting on AI-focused chips becoming a larger portion of TSMC’s revenue in the long term. The company stated that its AI revenue is growing at a rate of 50% annually. While some investors caution that the current level of AI chip demand may not be sustainable, others are keeping a close eye on geopolitical tensions in the region, particularly between China and Taiwan.