TSMC’s third-quarter profit rose 40% on strong demand for AI chips

TAIPEI (Reuters) – Taiwan Semiconductor Manufacturing Co (TSM, 2330.TW), the top maker of advanced chips used in artificial intelligence applications, is expected to report a 40% rise in third-quarter profit on Thursday on rising demand .

The world’s largest contract chipmaker, with customers like Apple (AAPL) and Nvidia (NVDA), has benefited from the rise of AI.

TSMC will report net profit of T$298.2 billion ($9.27 billion) for the quarter ended September 30, according to an LSEG SmartEstimate of 22 analysts. SmartEstimates give more weight to analyst forecasts that are more consistently accurate.

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

TSMC last week reported an increase in third-quarter revenue in Taiwan dollars, easily exceeding market expectations. The company gives its sales forecasts in US dollars at its earnings conference.

“Most of TSMC’s major customers, including Apple, Nvidia, AMD (AMD), Qualcomm (QCOM) and Mediatek (2454.TW) are launching new products that rely heavily on TSMC’s advanced process technologies,” said Li Fang-kuo, chairman of Chairman Capital Management.

“TSMC’s third-quarter earnings will easily exceed expectations,” Li added.

TSMC will update its outlook for the current quarter and full year, including capital spending in the race to expand production, at its quarterly results on Thursday at 6am GMT.

TSMC is spending billions to build new factories abroad, including $65 billion on three factories in the US state of Arizona, although it says most production will remain in Taiwan.

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

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

Hsinchu-based TSMC, colloquially known as the “holy mountain that protects the country” for its crucial role in Taiwan’s export-oriented economy, has little competition.

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

(Reporting by Ben Blanchard and Faith Hung; Editing by Christopher Cushing)