TSMC’s Sales Beat Estimates in Good Sign for AI Chip Demand

(Bloomberg) -- Taiwan Semiconductor Manufacturing Co. posted a better-than-expected 39% rise in quarterly revenue, assuaging concerns that AI hardware spending is beginning to taper off.

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The main chipmaker to Nvidia Corp. and Apple Inc. reported September-quarter sales of NT$759.7 billion ($23.6 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 Inc. and Alphabet Inc.’s Google can’t sustain their current pace of infrastructure spending without a compelling and monetizable 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% in premarket trading in New York on Wednesday, while TSMC’s US-traded ADRs rose a more modest 0.4%.

TSMC’s stock has more than doubled since the launch of ChatGPT, with its market capitalization briefly crossing the $1 trillion mark in July. That month, Taiwan’s largest company also lifted its outlook for 2024 revenue growth after quarterly results beat estimates.

In recent months, however, views have begun to diverge on whether the AI-driven growth momentum will last. That skepticism has led to a pullback in AI stocks, including flag bearer Nvidia, earlier this year.

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 Corp. to Baidu Inc. are splurging on AI infrastructure in a race to develop applications.

Nvidia’s key server assembly partner Hon Hai Precision Industry Co. 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.