(Bloomberg) -- Taiwan Semiconductor Manufacturing Co. forecast quarterly sales and capital spending that topped analysts’ forecasts, raising hopes that spending on artificial intelligence hardware will remain resilient in 2025.
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Major chipmakers Apple Inc. and Nvidia Corp. are expected to spend $38 billion to $42 billion on technology and capacity this year, 19% more than analysts expected. It forecast March quarter revenue of $25 billion to $25.8 billion, 6% above forecast. TSMC shares posted their biggest gain since October as expected spending fueled gains for U.S. and European chip equipment companies such as Applied Materials Inc. and ASML Holding NV.
TSMC's strong performance has boosted optimism about an unprecedented AI spending cycle, pushing companies like Nvidia to new heights. The emergence of ChatGPT has spurred a frenzy of data center construction over the past two years, benefiting many companies that provide the pipes and brains for the artificial intelligence boom.
Still, the lack of large-scale profitable AI applications so far has raised concerns about a potential bubble. Like many companies in the industry, TSMC is grappling with uncertainty stemming from a technology conflict between China and the United States that could disrupt supply chains and impede the flow of chips around the world. The United States this month announced new export control rules for artificial intelligence chips to reduce supplies to China.
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Beyond artificial intelligence, TSMC remains heavily reliant on consumer electronics and smartphones, given that Apple remains its largest customer. While the industry expects mobile AI capabilities to expand over time, driving the broader market, iPhone sales have proven sluggish.
On Thursday, CEO CC Wei warned that smartphone sales growth will remain in the low single digits in 2025. But he added that there will be a modest recovery in areas other than artificial intelligence.
TSMC's New York depositary receipts rose 7.3%, the largest intraday gain since October 17. Applied Materials shares rose 4% in New York, while semiconductor equipment supplier ASML rose 2.6% in Amsterdam. In Asia, Tokyo Electronics Co Ltd also gained.
The world's largest chipmaker reported a better-than-expected 57% rise in net profit.
Commenting on the 2025 revenue outlook, Bloomberg Intelligence analyst Charles Shum said: “For drivers, in addition to continued strong demand for AI chips, there will be support from new smartphone chips and AI PCs, and possibly There are more outsourcing orders from Intel, as well as WiFi 7 chips.”
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Taiwan Semiconductor Manufacturing Co. may be able to retain more than half of its existing orders from China after the Biden administration restricted advanced chip production to state-exempt chips with fewer than 30 billion transistors, Bloomberg reported. This will allow TSMC to maintain sales of smartphone SoCs and mid-range computing chips in China. Chinese chip orders accounted for 12.6% of TSMC’s revenue from January to September.
- Analysts Charles Shum and Steven Tseng
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Investors watch TSMC's capital spending for clues not only on demand for chips and electronics but also on the pace of its international expansion. Forecasts for 2025 given on Thursday suggest spending will increase by as much as 40% compared to 2024.
Geopolitical tensions have forced TSMC to shift production overseas. A senior Taiwanese official said the company plans to set up more factories in Europe, focusing on the artificial intelligence chip market. It was on top of a German factory under construction in Dresden.
On Thursday, executives confirmed that the factory it is building in Arizona — a cornerstone of Biden administration policy — will house cutting-edge technology in the future. But they did not list a specific timetable. Executives emphasized that the most advanced semiconductors will continue to be produced domestically.
TSMC expects growth in 2025 to be around 20%, roughly in line with analysts' expectations. Executives stressed that despite volatility in the smartphone space, spending on artificial intelligence will continue to drive growth.
--With assistance from Cindy Wang, Vlad Savov, Ville Heiskanen, and Debby Wu.
(Updated sharing of second paragraph)
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