TAIWAN Semiconductor Manufacturing Co (TSMC) posted on Wednesday (Oct 9) a better-than-expected 39 per cent rise in quarterly revenue, assuaging concerns that AI hardware spending is beginning to taper off.
The main chipmaker to Nvidia and Apple reported September-quarter sales of NT$759.7 billion (S$30.8 billion), versus the average projection for NT$748 billion. Taiwan’s largest company will disclose its full results next Thursday.
The better-than-anticipated performance may reinforce the view of investors betting that AI spending will remain elevated as companies and governments race for an edge in the emergent technology. Others caution that the likes of Meta Platforms and Alphabet’s Google cannot sustain their current pace of infrastructure spending without a compelling and monetisable AI use case.
Hsinchu-based TSMC is one of the key companies at the heart of a global surge in spending on AI development, producing the cutting-edge chips needed to train artificial intelligence. Its sales have more than doubled since 2020, with the seminal launch of ChatGPT sparking a race to acquire Nvidia hardware for AI server farms.
Shares in Nvidia were up about 1.1 per cent in premarket trading in New York on Wednesday, while TSMC’s US-traded American Depositary Receipts rose a more modest 0.4 per cent.
TSMC’s stock has more than doubled since the launch of ChatGPT, with its market capitalisation briefly crossing the US$1 trillion mark in July. That month, Taiwan’s largest company also lifted its outlook for 2024 revenue growth after quarterly results beat estimates.
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In recent months, however, views have begun to diverge on whether the AI-driven growth momentum will last. That scepticism has led to a pullback in AI stocks, including flag bearer Nvidia, earlier this year.
AI spending to remain high
TSMC’s view is that AI spending will remain high despite growing US-Chinese trade tensions. In both countries, startups and tech firms from Microsoft to Baidu are splurging on AI infrastructure in a race to develop applications.
Nvidia’s key server assembly partner Hon Hai Precision Industry earlier this week also reaffirmed demand for AI hardware remains solid. Hon Hai chairman Young Liu told Bloomberg TV on Tuesday that his company plans to boost server production capacity to meet “crazy” demand for the next-generation Blackwell chips, echoing similar remarks from Nvidia chief executive officer Jensen Huang earlier this month.
But analysts worry that delays in the delivery of Nvidia’s latest Blackwell chips might disrupt the industry, though most investors do not view that as a long-term issue for TSMC. With Intel and Samsung Electronics both struggling to get ahead in the business of bespoke chipmaking, TSMC’s market leadership is expected to help prop up margins.
While Apple’s A18 chip orders may decline due to soft demand for new iPhone 16s, robust orders from Nvidia and Intel are likely to offset any revenue shortfall for TSMC, said Charles Shum, Bloomberg Intelligence analyst. “Other key topics include the potential for earlier two-nanometre node mass production and plans to expand its chip-on-wafer-on-substrate advanced packaging capacity in 2025.”
TSMC now makes more than half of its revenue from high-performance computing, the segment of its business driven by AI demand. It also remains the sole manufacturer for the iPhone’s processor, although a growing number of analysts have voiced concerns over worse-than-expected demand for the new iPhone 16. BLOOMBERG
