TSMC bullish on outlook as AI boom blows Q3 profit past forecasts
Expects Q4 revenue of $26.1 bln-$26.9 bln
Sees 2024 capex at slightly higher than $30 bln
Q3 profit is a record T$325.3 bln (market forecast T$300.2 bln)
Q3 revenue jumps, beats market expectations
Share price has soared on strong AI-related demand
Adds U.S. chipmakers' shares in paragraph 8, TSMC's U.S.-listed shares in paragraph 9
By Yimou Lee, Ben Blanchard and Faith Hung
TAIPEI, Oct 17 (Reuters) -TSMC, the world's largest contract chipmaker, bet on sustaining its strong growth, after reporting on Thursday a forecast-beating 54% jump in quarterly profit driven by soaring demand for chips used in artificial intelligence (AI).
Taiwan Semiconductor Manufacturing Co 2330.TW, the dominant producer of advanced chips used in AI applications whose customers include Apple AAPL.O and Nvidia NVDA.O, has benefited from a surge towards AI across a spectrum of industries.
TSMC estimated its capital spending in the current quarter would more than double to around $11.5 billion and that the budget was likely to increase further next year, as it expects healthy demand for its products.
It said 2024 full-year revenue will grow close to 30% in U.S. dollar terms, compared to a previous guidance of slightly above the mid-20% range.
TSMC said revenue from AI processors is set to account for mid-teens percentage of its overall revenue this year.
"The demand is real," Chairman and CEO C.C. Wei told an earnings call, referring to AI and adding it would last for many years.
The company's robust performance and outlook underscore the continued strong demand for AI, after some industry watchers raised doubts following a lower than expected 2025 sales outlook earlier this week from ASML ASML.AS, the world's biggest chipmaking equipment supplier.
Shares ofU.S. chipmakers such as AI processor leader Nvidiaand rival AMDAMD.O rose more than 2.5% in premarket trading. Broadcom AVGO.O, Micron TechnologyMU.O, IntelINTC.O and QualcommQCOM.O shares were up between 1.5% and 3%.
U.S.-listed TSMC shares gained more than 8%, with the company's market capitalization set to cross $1 trillion if premarket gains hold.
At its quarterly earnings call on Thursday, TSMC TSM.N said it expects capital expenditure for this year at slightly higher than $30 billion, compared with a previous forecast of $30 billion-$32 billion, as it races to expand production.
Capital expenditure for 2025 was likely to be higher than this year, TSMC said, although it did not provide a figure.
It said next year looks to be "healthy", and forecast a similar outlook for the next five years.
Piter Yang, a fund manager of Fuh Hwa Securities Investment Trust, said TSMC's results had wiped away concerns about the industry that had been sparked by ASML's earnings.
"TSMC is a dominant company," he said. "It is the only one with advanced process technologies that won't be found at companies like Intel or Samsung."
TSMC is spending tens of billions of dollars building new factories overseas, including $65 billion on three plants in the U.S. state of Arizona, though it has said most manufacturing will remain in Taiwan.
It said on Thursday it expects its first fab in Arizona to see volume production in 2025, while its second fab there should start volume production in 2028. It forecasts the third Arizona fab to begin volume production by the end of the decade.
The Taiwan chipmaker said it expected fourth-quarter revenue of $26.1 billion-$26.9 billion, up from $19.62 billion in the same period of 2023.
RECORD QUARTERLY PROFIT
The bellwether for the chip industry reported earlier on Thursday a net profit of T$325.3 billion ($10.11 billion) for the quarter ended Sept. 30, its highest for any quarter, compared with the T$300.2 billion predicted by an LSEG SmartEstimate drawn from 22 analysts. SmartEstimates give greater weighting to forecasts from analysts who are more consistently accurate.
TSMC, Asia's most valuable publicly listed company, said third-quarter revenue rose 36% year-on-year to $23.5 billion, better than the company's previous forecast of $22.4 billion to $23.2 billion. The company last week announced third-quarter revenue in Taiwan dollars, coming in at T$759.69 billion.
"Our business in the third quarter was supported by strong smartphone and AI-related demand for our industry-leading 3nm and 5nm technologies," Wendell Huang, TSMC's CFO, told an earnings call. "Moving into the fourth quarter of 2024, we expect our business to continue to be supported by strong demand for our leading-edge process technologies."
The second half of the year is traditionally the peak season for Taiwanese tech companies as they race to supply customers ahead of the year-end holiday season in major Western markets.
Capital expenditure in the third quarter was $6.4 billion, TSMC said, compared with $6.36 billion in the second quarter.
The AI boom has helped drive up TSMC shares, with its Taipei-listed stock leaping 75% so far this year, compared with a 28% gain for the broader market .TWII, giving the company a market capitalisation of around $840 billion.
TSMC, colloquially referred to in Taiwan as the "sacred mountain protecting the country" for its critical role in Taiwan's export-dependent economy, faces little competition, though both Intel INTC.O and Samsung 005930.KS are trying to challenge its dominance.
($1 = 32.1700 Taiwan dollars)
TSMC's capital expenditure https://reut.rs/408WoBn
Reporting by Yimou Lee, Ben Blanchard and Faith Hung; additional reporting by Arsheeya Bajwa; Editing by Christopher Cushing, Muralikumar Anantharaman and Tomasz Janowski
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