Taiwan Semiconductor Manufacturing Co. (TSMC) has reported better-than-expected third-quarter revenue, thanks to strong demand from artificial intelligence (AI) players. While smartphone and laptop chip sales were sluggish, TSMC’s revenues only dropped by 11% year-on-year, beating estimates.
TSMC, which is a key chipmaker for Apple and Nvidia, recorded revenue of NT$546.7 billion ($17 billion) between July and September, according to Bloomberg’s calculations. This positive performance is primarily attributed to the increasing demand for AI chips from data centers, which are driving growth for TSMC’s major clients, including Nvidia. Furthermore, the memory used in these AI systems is also contributing to the steady revenue.
The preliminary sales figures come as a relief to investors who are looking for signs that the rising orders for AI chips are surpassing supply constraints and translating into actual sales. This is crucial in alleviating concerns about a prolonged slump in the semiconductor sector.
In addition to AI demand, TSMC’s advanced packaging service is also expected to boost sales. Despite the semiconductor sector still grappling with excess inventory, Bloomberg Intelligence analyst Charles Shum believes that the strong demand for TSMC’s packaging service could generate positive results. Furthermore, a favorable exchange rate may contribute to improving profit margins for the company.
Investors are eagerly waiting for TSMC’s outlook, which is set to be announced when the company reports its July-September earnings on October 19. TSMC is considered a bellwether for the tech sector, as concerns over slowing sales growth at tech giants like Apple continue to rise.
On Friday, TSMC’s stock closed about 0.8% higher in Taipei. Since the beginning of the year, its shares have gained more than 18%, indicating investor confidence in the company.
Overall, despite the challenges faced by the semiconductor industry, TSMC’s strategic focus on AI chips and its relationship with key clients such as Apple and Nvidia have helped to mitigate the impact of declining smartphone and laptop chip sales. With demand for AI chips soaring, TSMC is well-positioned to benefit from this lucrative market segment.