TSMC raises growth forecasts for 2024

Taiwan Semiconductor Manufacturing Co $TSM raised its 2024 revenue growth forecasts after releasing quarterly results that beat expectations. This reflects the company's confidence in the long-term growth of global artificial intelligence (AI) spending.

The maker of chips for Apple Inc. and Nvidia Corp. now expects revenue growth beyond the 20% maximum midpoint it had previously forecast. For the current quarter, TSMC forecasts revenue of up to $23.2 billion, above analysts' expectations. The company also refined its capital expenditure forecast to the high end of its estimate, $30 billion to $32 billion, up from $28 billion previously.

The revisions underscore TSMC's view that AI spending will remain high despite rising trade tensions between the U.S. and China. In both countries, startups and technology firms such as Microsoft Corp. and Baidu Inc. are investing in AI infrastructure, which is largely powered by Nvidia products. TSMC shares listed in the U.S. thus rose more than 3.5% in pre-market trading.

Market expectations had been rising in the weeks leading up to TSMC's report. The broader smartphone market - another major driver for Taiwan's largest company - is on the road to recovery. Apple gave suppliers an upbeat forecast for shipments of its upcoming iPhone 16, based on the potential strength of its new AI services. That helped TSMC report a better-than-expected 36% profit increase for June.

"This time around, the demand for AI is more realistic than two or three years ago," TSMC CEO C.C. Wei said Thursday on an earnings call. The company is increasing capacity to find the right balance.

Net profit $TSM rose to TWD247.8 billion ($7.6 billion) after the company reported that its second-quarter revenue grew at its fastest pace since 2022. The company said net sales rose 40.1% from a year earlier to NT$673.51 billion. Performance computing, led by AI, accounted for 52% of TSMC's sales, the first time the segment exceeded half of sales.

The world's largest advanced chipmaker was one of the beneficiaries of the global race to secure semiconductors to power AI. Its stock has more than doubled since the start of the AI boom in late 2022, following the launch of OpenAI's ChatGPT, reaching a series of all-time highs as the company's market cap briefly crossed the $1 trillion mark.

"The demand is so high that I have to work very hard to meet the demand of my customers," Wei said. TSMC has been testing customers' chips and has found the machine learning enabled by those chips useful for boosting its own productivity, though it too has to wait in line for scarce AI products.

The company is likely to meet its gross margin target of 53% or more, Wei said. "My customers are doing well, so we should also do well," he said.

TSMC projects third-quarter revenue between $22.4 billion and $23.2 billion. By comparison, sales in the same period a year ago were $17.3 billion.

Source: Yahoo Finance, CNN.

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