(Bloomberg) — Taiwan Semiconductor Manufacturing Co. posted a better-than-expected 39% rise in quarterly income, assuaging issues that AI {hardware} spending is starting to taper off.
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The primary chipmaker to Nvidia Corp. and Apple Inc. reported September-quarter gross sales of NT$759.7 billion ($23.6 billion), versus the common projection for NT$748 billion. Taiwan’s largest firm will disclose its full outcomes subsequent Thursday.
The higher-than-anticipated efficiency could reinforce the view of traders betting that AI spending will stay elevated as corporations and governments race for an edge within the emergent expertise. Others warning that the likes of Meta Platforms Inc. and Alphabet Inc.’s Google can’t maintain their present tempo of infrastructure spending with no compelling and monetizable AI use case.
Hsinchu-based TSMC is among the key corporations on the coronary heart of a worldwide surge in spending on AI growth, producing the cutting-edge chips wanted to coach synthetic intelligence. Its gross sales have greater than doubled since 2020, with the seminal launch of ChatGPT sparking a race to amass Nvidia {hardware} for AI server farms.
Shares in Nvidia had been up about 1.1% in premarket buying and selling in New York on Wednesday, whereas TSMC’s US-traded ADRs rose a extra modest 0.4%.
TSMC’s inventory has greater than doubled for the reason that launch of ChatGPT, with its market capitalization briefly crossing the $1 trillion mark in July. That month, Taiwan’s largest firm additionally lifted its outlook for 2024 income progress after quarterly outcomes beat estimates.
In current months, nonetheless, views have begun to diverge on whether or not the AI-driven progress momentum will final. That skepticism has led to a pullback in AI shares, together with flag bearer Nvidia, earlier this yr.
TSMC’s view is that AI spending will stay excessive regardless of rising US-Chinese language commerce tensions. In each international locations, startups and tech corporations from Microsoft Corp. to Baidu Inc. are splurging on AI infrastructure in a race to develop purposes.
Nvidia’s key server meeting associate Hon Hai Precision Trade Co. earlier this week additionally reaffirmed demand for AI {hardware} stays strong. Hon Hai Chairman Younger Liu instructed Bloomberg TV on Tuesday that his firm plans to spice up server manufacturing capability to satisfy “loopy” demand for the next-generation Blackwell chips, echoing comparable remarks from Nvidia Chief Govt Officer Jensen Huang earlier this month.
However analysts fear that delays within the supply of Nvidia’s newest Blackwell chips may disrupt the business, although most traders don’t view that as a long-term difficulty for TSMC. With Intel Corp. and Samsung Electronics Co. each struggling to get forward within the enterprise of bespoke chipmaking, TSMC’s market management is predicted to assist prop up margins.
What Bloomberg Intelligence Says
Whereas Apple’s A18 chip orders could decline as a consequence of smooth demand for brand new iPhone 16s, sturdy orders from Nvidia and Intel are more likely to offset any income shortfall for TSMC. Different key matters embrace the potential for earlier 2-nanometer (N2) node mass manufacturing and plans to broaden its chip-on-wafer-on-substrate (CoWoS) superior packaging capability in 2025.
– Charles Shum, analyst
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TSMC now makes greater than half of its income from high-performance computing, the phase of its enterprise pushed by AI demand. It additionally stays the only producer for the iPhone’s processor, though a rising variety of analysts have voiced issues over worse-than-expected demand for the brand new iPhone 16 vary.
(Updates with shares response in)
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