Profit beats expectations as AI boom fuels 54% surge

Taiwan Semiconductor Manufacturing Company on Thursday reported a 54% rise in third-quarter net profit and forecast annual sales growth in the final three months of the year as global chipmakers continue to benefit from demand boosted by AI applications.

The company's net profit was 325.3 billion Taiwanese dollars ($10.1 billion) in the July-September quarter, beating the LSEG estimate of 300.2 billion Taiwanese dollars cited by Reuters.

U.S.-listed stocks rose 8.2% in premarket trading as of 6:24 a.m. ET.

TSMC is the world's largest manufacturer of advanced chips, serving customers such as Apple And Nvidia.

Net sales were $23.5 billion in the third quarter, up 36% year over year. TSMC's gross margin rose to 57.8% in the July-September period, compared to 54.3% in the same period last year.

“Based on the current business outlook, we expect our fourth quarter revenue to be between $26.1 billion and $26.9 billion, representing a sequential increase of 13% and a year-over-year increase of 35%, respectively “Middle corresponds to,” TSMC Chief Financial Officer Wendell Huang said during a conference call after the results were released, according to a phone transcript obtained by FactSet.

In the third quarter, “our business was supported by strong smartphone and AI-related demand for our industry-leading 3nm and 5nm technologies,” TSMC said in a statement, referring to its semiconductor nodes.

In Thursday's earnings call, TSMC Chairman and CEO CC Wei emphasized that AI demand is “real” and that the company has experienced the “strongest and most comprehensive growth of any company in this industry” as a result.

“We've been talking to our customers all the time, including our hyperscaler customers who are building their own chips. And almost every AI innovator works with TSMC,” he said.

The company's Taipei-listed shares have risen nearly 80% year-to-date, topping gains of 28.57% broader market in the same period.

TSMC now expects its capital spending to rise to just over $30 billion this year, it said in its earnings call. The company's capital expenditures rose slightly to $6.4 billion in the third quarter, compared to $6.36 billion in the previous three months.

The Taiwanese chipmaker, whose advanced chips are critical to a range of products ranging from smartphones to AI applications, has expanded its manufacturing footprint worldwide and made a huge foreign investment of $65 billion for three chip factories in Arizona, to meet US demand as well as opening its first factory in Japan earlier this year.

TSMC's earnings increase comes in the same week as the Netherlands-based company ASMLwhich supplies machinery to the Taiwanese company, gave a lower-than-expected forecast for net sales, causing shares to plunge.

Some market participants have questioned the long-term resilience of the AI ​​boom and the return on increasing investment in the technology sector – while Young Liu, CEO and chairman of key Apple supplier Foxconn, told CNBC last week that the AI ​​frenzy is “still quite a bit has”. Time to go,” as advanced language models evolve with each new iteration.

Correction: This article has been updated to accurately reflect that TSMC's third-quarter net profit reached 325.3 billion Taiwanese dollars.