Taiwan Semiconductor Manufacturing Co. Beats Estimates, Fuels AI Hardware Optimism
Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest chipmaker, has exceeded analysts’ expectations with its quarterly sales and capital expenditure projections, sparking hope that spending on AI hardware will remain robust in 2025.
Strong Performance Amidst Uncertainty
Despite concerns about a potential bubble in the AI market and uncertainties surrounding the US-China tech conflict, TSMC’s strong performance has buoyed optimism around an unprecedented AI spending cycle. The company’s revenue projection of $25 billion to $25.8 billion in the March quarter is up to 6% above projections, while its capital expenditure forecast of $38 billion to $42 billion this year is up to 19% more than anticipated.
AI Boom Drives Growth
The advent of ChatGPT has spurred a frenzied datacenter build-out over the past two years, benefiting companies that provide the infrastructure and technology for the AI boom. While there are concerns about the lack of a big profit-generating AI application, TSMC’s strong performance suggests that spending on AI hardware will continue to drive growth.
Diversification Beyond AI
Away from AI, TSMC remains heavily reliant on consumer electronics and smartphones, with Apple remaining its largest customer. While iPhone sales have been muted, the industry expects mobile AI features to expand over time, driving the broader market. TSMC’s CEO, C.C. Wei, warned that smartphone unit growth will remain in the low-single-digits in 2025, but added that there will be a mild recovery in segments other than AI.
International Expansion
Geopolitical tensions have pushed TSMC to manufacture abroad, with plans to build more plants in Europe focused on the market for artificial intelligence chips. The company is also building a factory in Arizona, which will house cutting-edge technology in the future. While the most advanced semiconductors will continue to be produced domestically, TSMC’s international expansion is expected to drive growth.
Outlook for 2025
TSMC’s 2025 projection represents a rise in spending of as much as 40% from 2024, with growth expected in the mid-20% range. Executives emphasized that, despite a volatile smartphone arena, spending on AI will continue to drive growth. With its strong performance and optimistic outlook, TSMC is poised to lead the charge in the AI hardware market.
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