(Bloomberg) — Taiwan Semiconductor Manufacturing Co. has raised its 2024 revenue growth target after quarterly results beat expectations, easing concerns about global chip demand and the sustainability of an AI hardware boom.
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Nvidia Corp.’s main chipmaker and Apple Inc. now expects sales to rise 30% this year, a sharp increase from previous projections of a maximum increase in the mid-20%s. That’s after TSMC reported better-than-forecast earnings for the September quarter. It projects capital expenditures of just over $30 billion in 2024 – in line with previous expectations.
TSMC’s increased outlook should help allay fears that investors have misjudged AI demand. Shares are up more than 70% this year, surpassing many of Asia’s biggest technology companies, reflecting strong sales of Nvidia Corp. chips essential to the development of artificial intelligence.
Taiwan’s largest company had raised its 2024 revenue outlook just a few months ago in July, raising expectations for spending on AI infrastructure from the likes of Microsoft Corp. and Amazon.com Inc. underlined. Steady adoption of artificial intelligence should also boost iPhone sales. and other gadgets in the long run.
Click here for a live blog on TSMC’s earnings.
Investors had been looking for deviations in the outlook after major supplier ASML Holding NV reported only half of the orders estimated by analysts. The chip equipment maker blamed a slower-than-expected recovery in the automotive, mobile and PC markets, impacting chip factory expansion plans. But AI remains a bright spot, executives said.
On Thursday, TSMC reported a better-than-expected 54% increase in its September quarter results.
Although official trading in the company’s U.S. depository receipts doesn’t begin for a few hours, ADRs rose about 4.5% on Robinhood’s overnight trading platform. TSMC is popular among US retail investors looking to bet on the AI ​​theme. Shares of Japanese chip equipment makers including Lasertec Corp. also pared losses in Tokyo after TSMC reported.
What Bloomberg Intelligence Says
TSMC’s short-to-medium term revenue prospects remain solid, despite the potential slowdown in global manufacturing capacity growth implied by ASML – the largest tooling supplier – reporting third-quarter book half as high as expected. Strong demand for TSMC’s 2- and 3-nanometer technologies from Nvidia, AMD, Apple and Qualcomm provide compensation. TSMC’s superior production yields, improvement in EUV machine productivity and leadership in 2.5D and 3D packaging provide further sales support.
– Charles Shum, analyst
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The world’s largest maker of advanced chips has been one of the biggest beneficiaries of a global race to develop artificial intelligence. Shares have more than doubled since the boom kicked off in late 2022 with the debut of OpenAI’s ChatGPT. TSMC’s market capitalization briefly crossed the $1 trillion mark in the US.
But even before ASML, some investors have grown cautious about the sustainability of global AI spending. They wonder whether big tech companies like Meta Platforms Inc. and Alphabet Inc. will continue to invest in AI chips and data centers without a truly great AI application.
The risks of overcapacity in data centers and geopolitical issues have made some investors nervous. Bloomberg reported this week that Biden administration officials have discussed restricting sales of advanced AI chips from Nvidia and other U.S. companies on a country-specific basis.
For the time being, TSMC appears to be pursuing rapid international expansion.
The company is planning more factories in Europe with a focus on the artificial intelligence chip market, according to a senior Taiwanese official. This is in addition to ongoing construction work in Japan, Arizona and Germany.
–With help from Vlad Savov, Cindy Wang, and Mayumi Negishi.
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