(Bloomberg) — Taiwan Semiconductor Manufacturing Co.’s revenue rose 33% last month, a positive sign for investors betting on a recovery in the smartphone market and continued demand for Nvidia Corp.’s AI chips.
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Revenue reached NT$250.9 billion ($7.8 billion) in August, a slowdown from the previous month’s 45% growth rate. For the third quarter, analysts expect TSMC’s revenue to grow 37%, continuing its recovery from post-Covid lows in 2023.
While it’s just a one-month snapshot, the results could ease concerns that the market has overestimated the sustainability of AI infrastructure spending. Shares of Nvidia lost some $279 billion on Sept. 3 in their biggest single-day loss after reporting profits that missed high expectations.
That puts TSMC on track to beat average projections for third-quarter revenue by a small margin, Bernstein analysts led by Mark Li wrote. “If September follows the average seasonality of the past 8 years, 3Q24 revenue would come in 5% to 6% above both the midpoint and consensus,” he said.
Taiwan’s largest company now derives more than half of its revenue from high-performance computing, the segment of the business driven by demand for AI.
Nvidia’s favored chipmaker is also the primary maker of the iPhone’s core processor. Apple Inc. unveiled the iPhone 16 on Monday, built for AI “from the ground up” but with capabilities added to the device gradually via software updates. Wall Street is betting on a recovery in mobile demand.
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Apple’s adoption of Wi-Fi 7 on the iPhone 16 and 16 Pro should accelerate technology penetration and boost demand for TSMC’s N6 (7-nanometer) and N4 (5-nanometer) nodes, which are already being used by Broadcom and MediaTek and others to produce Wi-Fi 7 chips. The performance improvements of the A18 and A18 Pro processors are in line with our expectations, reinforcing a positive outlook for TSMC’s N3E node sales growth.
– Charles Shum, analyst
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TSMC gave an upbeat assessment of its business and prospects when it last reported earnings. In July, the world’s largest contract chipmaker raised its full-year growth outlook to above the mid-20% high it had previously forecast.
As the market improves, CEO CC Wei is leading a major global expansion.
The company has reported early progress on a project in Arizona, is considering a third plant in Japan and just weeks ago broke ground on a €10 billion German factory.
(Updates with analyst comment from fourth paragraph)
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