(April 10): Taiwan Semiconductor Manufacturing Co (TSMC) reported a 35% increase in quarterly revenue, suggesting global artificial intelligence (AI) chip demand remained intact during the first weeks of war in the Middle East.
Revenue for the three months through March rose to NT$1.13 trillion, the main chipmaker for Nvidia Corp and Apple Inc said on Friday in a statement. Analysts estimated NT$1.12 trillion on average. Sales in March rose 45%.
The report may help quell concerns that a prolonged crisis in the Middle East will dampen demand for power-hungry AI data centres and gadgets like the iPhone. The war has put pressure on global shipping routes and energy prices, and investors are looking for clues as to whether its impact will spread to tech giants’ spending plans.
TSMC and AI customers such as Nvidia also face increasing scepticism that they can keep growing at current rates. After explosive sales turned Nvidia into the world’s most valuable company and TSMC the most valuable company in Asia, investors are seeking assurances that booming AI spending can be maintained.
"TSMC’s 1Q results are likely to beat the guidance midpoint — and consensus — given sustained strong demand for 3- and 5-nanometer nodes used in AI accelerators and networking-chip production. Favourable appreciation of the US dollar against New Taiwan Dollar provide a further tailwind. We calculate the gross margin can reach a record high of 65% at least.
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"The earnings-call focus will be on management’s view on Android smartphone and PC demand [especially whether higher memory costs might prompt another inventory correction]; If fab operations and the 2H margin could be pressured by any disruption to chemicals or energy supply, or higher related costs. Another item to watch will be if sustained, multiyear AI chip demand and strength in leading-edge nodes supports raising the long-term gross-margin target above 58%," says Charles Shum, analyst at Boomberg Intelligence.
TSMC is set to report full first-quarter results on April 16. Taiwan’s largest company, which makes the vast majority of the world’s most advanced semiconductors, is a primary beneficiary of a global race to build AI infrastructure as it serves the likes of Nvidia, Advanced Micro Devices Inc and Broadcom Inc. Shares of TSMC have gained almost 30% this year, outperforming its major customers.
But major tech companies have struggled to fulfill investors’ sky-high hopes, after Alphabet Inc, Amazon.com Inc, Meta Platforms Inc and Microsoft Corp earmarked US$650 billion for AI expenditures this year. Shares of Nvidia are down 1.4% this year even after the global AI chip leader delivered an outlook that beat estimates, on top of a 73% jump in quarterly revenue.
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