TSMC’s Profits Surpass Expectations Amid Strengthening AI Megatrend

TSMC, the world’s leading manufacturer of advanced AI chips, has reported impressive financial growth driven by the ongoing AI megatrend. For the third quarter of 2023, the company achieved a remarkable 39.1% increase in net profit, reaching T$452.3 billion (approximately $14.76 billion). This achievement marks TSMC’s sixth consecutive quarter of double-digit profit growth, surpassing analysts’ expectations.

Fourth-Quarter Outlook and Capital Investments

Looking ahead, TSMC forecasts a fourth-quarter revenue increase of up to 24%. The firm remains optimistic about sustained demand for AI-related products, which it believes will continue into 2024. TSMC is also maintaining its capital expenditure forecast of up to $42 billion through 2025.

Customer Base and Market Position

TSMC’s customer roster includes major tech companies such as Nvidia and Apple, which play significant roles in driving demand for advanced chips. The company cited a stronger-than-expected demand for AI chips, suggesting that the ongoing AI boom is more robust than previously anticipated.

Impact of Global Trade Policies

Despite its positive growth trajectory, TSMC faces potential challenges from evolving U.S. trade policies. Tariffs on semiconductors pose a risk to the global chip industry, injecting uncertainty into TSMC’s operations. The company had previously announced a substantial $100 billion investment in the U.S. and committed an additional $65 billion for three facilities in Arizona, one of which is already operational.

Industry Dynamics

• ASML, a key supplier for TSMC, reported third-quarter bookings that exceeded expectations but anticipated a decline in demand from China next year.
• Samsung Electronics also indicated potential profit growth linked to the AI sector, forecasting its highest quarterly profits in over three years.

TSMC’s shares have appreciated by 38% year-to-date, significantly outpacing the broader market, which has risen by 20% during the same period. This demonstrates TSMC’s resilience in navigating the challenges posed by global economic factors.

Overall, TSMC’s performance highlights the growing significance of the AI market and its integral role in shaping the future of semiconductor manufacturing.