AI Chip Demand Boosts TSMC's Second Quarter Profits by 30%

Taipei: Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker and a key supplier for Apple and Nvidia, is expected to announce a significant 30% increase in second-quarter profit on Thursday. This surge in profitability, driven by soaring demand for advanced chips used in artificial intelligence applications, has propelled TSMC's stock and the broader Taiwan market to record highs.

According to a SmartEstimate compiled from 20 analysts by LSEG, TSMC is projected to report a net profit of 236.1 billion Taiwan dollars (approximately 7.25 billion USD) for the quarter ending June 30. This compares to a net profit of 181.8 billion Taiwan dollars in the second quarter of 2023.

TSMC recently reported robust second-quarter revenue figures, surpassing market expectations comfortably. Analysts and industry experts, such as President Capital Management Co Chairman Li Fang-kuo, anticipate a strong outlook for the third quarter across all TSMC products.

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During its upcoming earnings call scheduled at 0600 GMT on Thursday, TSMC will provide updated forecasts for the current quarter and the full year, including details on its capital expenditure plans aimed at expanding production capacity. The company is investing heavily in new facilities, including a $65 billion investment in three plants in Arizona, USA, although the majority of manufacturing will remain in Taiwan.

TSMC's capital spending guidance for this year, reiterated from its April earnings call, remains between $28 billion to $32 billion, with a focus on advanced technologies constituting 70% to 80% of the total expenditure.

Analysts, including Chu Yen-min from KGI Securities Investment Advisory Co, suggest that TSMC might increase its capital spending further, driven by positive market dynamics that support both its stock price and the broader market sentiment.

The boom in artificial intelligence technologies has been instrumental in boosting TSMC's market valuation, making it Asia's most valuable company. Its stock on the Taipei exchange has surged by 75% this year alone, significantly outpacing the broader market's 33% gain.

Often referred to as the "sacred mountain protecting the country" in Taiwan due to its critical role in the nation's export-oriented economy, TSMC faces limited competition in its sector, despite efforts by Intel and Samsung to challenge its dominance.