TSMC raises revenue outlook to reflect hot AI demand

(Bloomberg) — A Taiwanese semiconductor manufacturer raised its forecast for 2024 revenue growth after quarterly results beat estimates, reflecting its confidence in the longevity of the global AI spending boom.

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Apple Inc. and Nvidia Corp. The chipmaker now expects sales to grow more than 20% in the mid-high range it previously guided for. TSMC forecast revenue of $23.2 billion for the current quarter, beating analysts’ estimates. It cut its forecast for capital spending to $32 billion at the high end of its outlook, down from $28 billion previously.

The revisions underscore TSMC’s view that AI spending will remain elevated despite heightened US-China trade tensions. In both countries, startups and technology companies ranging from Microsoft Corp. to Baidu Inc. are increasingly powered by Nvidia accelerators in AI infrastructure. US-listed shares of TSMC were up 4% at 9:30 a.m. in New York on Thursday.

Market expectations rose in the weeks leading up to TSMC’s report. The broader smartphone market — another big driver for Taiwan’s largest company — is on the road to recovery. Apple gave an upbeat guidance to suppliers on shipments of the upcoming iPhone 16 based on the potential strength of its new AI services. That helped TSMC report a better-than-expected 36% rise in June-quarter profit.

“At this time, the demand for AI is more real than it was two or three years ago,” TSMC CEO CC Wei said on an earnings call Thursday. The company is increasingly capable of finding the right balance. “Supply continues to be very, very tight through 2025.”

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Net income rose to NT$247.8 billion ($7.6 billion) after the company revealed its second-quarter sales grew the fastest since 2022, with AI-led high-performance computing accounting for 52% of TSMC’s revenue, the first time it has done so. More than half of sales.

The world’s largest maker of advanced chips is one of the beneficiaries of a global race to secure semiconductors to power artificial intelligence. Following the launch of OpenAI’s ChatGPT, its shares have more than doubled since the start of the AI ​​boom in late 2022, and the company’s market capitalization briefly surpassed the $1 trillion mark, hitting an all-time high.

“The demand is so high that I have to work very hard to meet my customers’ needs,” Wei said. DSMC is testing customers’ chips and has found machine learning to be useful in boosting its own productivity, though it will have to queue for rarer AI products, he said.

Wei said the company is likely to hit its gross margin target of 53% or higher. “My customers are doing well, so we should be doing well,” he said.

Here’s what Bloomberg Intelligence says

ASML’s 23.7% improvement in order bookings in 2Q, TSMC’s N2 growth continues to be healthy, accelerating capacity development. TSMC is scheduled to begin mass production in 2H25, starting with approximately 30,000-wafer monthly capacity in Hsinchu, Taiwan. We believe its N2 process is at least 15% higher than N3.

– Charles Shum, BI analyst

Investor cheer on TSMC’s prospects has waned since Bloomberg Businessweek published comments by U.S. Republican presidential candidate Donald Trump, who said he was too lax on defending Taiwan in case of Chinese aggression.

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Separately, the Biden administration is considering implementing its toughest trade restrictions on some suppliers to Chinese chip companies, Bloomberg News reported, sparking a sell-off in global tech stocks as investors pondered the collapse of the world’s largest semiconductor arena.

Caution about AI is now emerging in the corners of the market. This month, Goldman Sachs warned that the biggest US tech companies could be spending too much on AI.

As revenue expansion slows at many of the world’s biggest tech companies, investors will focus on how companies like utilities and data centers are deploying capital into AI, and whether those investments will translate to the bottom line and boost stock value.

“AI trading has come under increasing scrutiny,” Goldman Sachs strategists Ryan Hammond and David Costin said in a note this week.

–With help from Vlad Savov, Cindy Wang, Edwin Chan and Liau Y-Sing.

(Improves share price.)

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