Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) quarterly sales topped estimates, reinforcing investor hopes that the torrid pace of artificial intelligence (AI) hardware spending would extend into this year.
The go-to chipmaker for Nvidia Corp and Apple Inc reported a 39 percent rise in December-quarter revenue to NT$868.5 billion (US$26.35 billion), based on calculations from monthly disclosures. That compared with an average estimate of NT$854.7 billion.
The strong showing from Taiwan’s largest company bolsters expectations that big tech companies from Alphabet Inc to Microsoft Corp would continue to build and upgrade datacenters at a rapid clip to propel AI development.
Photo: Chiang Ying-ying, AP
Growth accelerated for TSMC last month, capping 34 percent revenue growth for last year. That compares with TSMC’s official target of a 30 percent annual rise, although that outlook was expressed in US dollar terms. The world’s largest maker of advanced chips has been one of the biggest beneficiaries of a global race to develop AI.
TSMC’s market value nearly doubled last year, and it now trades in the US at a valuation close to US$1.1 trillion. However, some investors worry about when the AI boom would peter out. While TSMC’s revenue beat, it was just 1.6 percent higher than the average projection and fell short of the most bullish analyst expectations.
More bearish market observers point to potential over-building, bottlenecks to development such as power shortages, and the persistent absence of a killer AI app or service that would use up all of that server capacity.
The company’s gross margin is likely to expand to a two-year high of 58 percent or more, Bloomberg analyst Charles Shum said.
Four areas merit attention, Shum said.
First, the outlook for chip-on-wafer-on-substrate advanced-packaging capacity build and revenue, which is likely to give insight into the expected strength for AI chip demand in the coming twelve to eighteen months, he said.
Second, progress on the US Arizona fab’s ramp-up, which is critical to meeting the onshoring chipmaking needs of Apple, Nvidia and others, he said.
Third, potential margin pressure from weaker demand in 7-nm, 16-nm and larger mature nodes, he said.
Finally, capital-spending plans this year, which would signal TSMC’s confidence in the uptake of its next-generation N2 node, he added.
The US has also erected a web of restrictions to curtail the flow of Nvidia’s most powerful chips to China, with uncertain longer-term ramifications for TSMC’s key customer.
Morgan Stanley expects TSMC to project annual sales growth of low-20 percent in dollar terms. “TSMC usually guides conservatively at the beginning of the year, and then over-delivers,” analyst Charlie Chan wrote, adding that the company raised its outlook for growth over the course of last year and might again be starting from a more conservative position at the start of a new year.
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