Artificial intelligence is increasingly hungry for chips: TSMC's accounts shine

Accounts above expectations for TSMC. The Taiwanese semiconductor giant released its latest quarterly earnings report, in which it reported a higher-than-expected 54% increase in quarterly profits, after strong sales of Nvidia's AI chips offset a decline in the mobile sector.

TSMC, which is also Nvidia's and Apple's main chipmaker, reported a net profit in the September quarter of 325.3 billion Taiwanese dollars ($10.1 billion), against an average estimate of 299.3 billion Taiwanese dollars. This followed a 39% increase in revenue in the previously reported period.

TSMC's shares have soared more than 70 per cent this year, outperforming many of Asia's largest technology companies and reflecting the high expectations associated with its artificial intelligence business. In July, Taiwan's largest company raised its revenue forecast for 2024, underlining expectations of sustained spending on artificial intelligence infrastructure by companies such as Microsoft and Amazon. The continued adoption of artificial intelligence is expected to help fuel sales of iPhones and other gadgets.

However, the performance of the Dutch ASML, which reported only half of the orders estimated by analysts, weighed on the chip market. The chip equipment manufacturer blamed a slower-than-expected recovery in the automotive, mobile and PC markets, which impacted chip plant expansion plans. While artificial intelligence remains a strength, executives said.

Returning to TSMC, its short- and medium-term revenue outlook remains solid, despite the potential slowdown in global capacity growth due to the fact that ASML, its largest supplier, reported a third-quarter balance at half the expected level. The strong demand for TSMC's 2- and 3-nanometer technologies from Nvidia, AMD, Apple and Qualcomm compensates. TSMC's superior production yields, improved EUV machine productivity, and leadership in 2.5D and 3D packaging provide additional sales support.