TSMC third-quarter profit seen jumping 40% on strong AI chip demand

By Ben Blanchard and Faith Hung

TAIPEI (Reuters) – Taiwan Semiconductor Manufacturing Co, the main producer of advanced chips used in artificial intelligence applications, is expected to report a 40% leap in third-quarter profit on Thursday thanks to soaring demand.

The world’s largest contract chipmaker, whose customers include Apple (NASDAQ:) and Nvidia (NASDAQ:), has benefited from the surge towards AI.

TSMC is set to report a net profit of T$298.2 billion ($9.27 billion) for the quarter ended Sept. 30, according to a LSEG SmartEstimate drawn from 22 analysts. SmartEstimates give greater weighting to forecasts from analysts who are more consistently accurate.

That estimate compares to the 2023 third-quarter net profit of T$211 billion.

TSMC last week reported a jump in third-quarter revenue as reported in Taiwan dollars, comfortably beating market expectations. The company gives its revenue outlook in U.S. dollars at its earnings conference.

“Most of TSMC’s major clients, including Apple, Nvidia, AMD (NASDAQ:), Qualcomm (NASDAQ:) and Mediatek are launching new products which heavily rely on TSMC’s advanced process technologies,” said Li Fang-kuo, chairman of President Capital Management.

“TSMC’s Q3 earnings will exceed expectations by a lot,” Li added.

TSMC, at its quarterly earnings call at 0600 GMT on Thursday, will update its outlook for the current quarter as well as for the full year, including its capital expenditure as it races to expand production.

TSMC is spending billions building new factories overseas, including $65 billion on three plants in the U.S. state of Arizona, though it says most manufacturing will remain in Taiwan.

On its last earnings call in July, TSMC raised its full-year revenue forecast and adjusted its capital expenditure plans for this year to between $30 billion and $32 billion, compared with a previous forecast of $28 billion to $32 billion.

The AI boom has helped drive up the price of shares in Asia’s most valuable company, with TSMC’s Taipei-listed stock soaring 77% so far this year, compared with a 28% gain for the broader market.

Hsinchu-headquartered TSMC, colloquially referred to the “sacred mountain protecting the country” for its crucial role in Taiwan’s export-oriented economy, faces little competition.

Once the dominant force in the semiconductor industry, five-decade-old Intel (NASDAQ:) is facing one of its worst periods as losses mount at the contract manufacturing unit it is building out in hopes of challenging TSMC.

($1 = 32.1570 Taiwan dollars)