Taiwan Semiconductor Manufacturing Co (TSMC) witnessed a remarkable surge in quarterly revenue, marking its fastest growth in over a year. This growth reinforces the belief that the global surge in artificial intelligence (AI) development is driving demand for high-end chips and servers. Major chip producers like Nvidia and Apple reported a 16% increase in sales for the March quarter, surpassing analysts' expectations.
This positive performance suggests that TSMC, the world's most valuable chip maker, is poised for robust growth this year after enduring a downturn in smartphone and computer sales post-Covid. TSMC plans to invest between US$28 billion to US$32 billion in capital expenditure and anticipates revenue growth of at least 20% this year, reversing the slight decline seen in 2023. The company's market value has more than doubled since hitting a low in October 2022, driven by investor confidence in sustained demand for its advanced AI chips, particularly those supplied to Nvidia.
TSMC revealed in January that its AI revenue is experiencing a 50% annual growth rate. To meet the rising demand, the company is expanding its production facilities in the US, Japan, and Germany to fabricate AI chips used in data centers operated by tech giants such as Amazon and Microsoft. Additionally, there are indications of a broader market recovery, as seen in the profit rebound of Asian competitor Samsung Electronics in the first quarter, partly attributed to improvements in its semiconductor division.
However, despite the optimistic outlook, some investors caution against viewing the current level of AI chip demand as sustainable in the long term. Concerns persist, particularly regarding the geopolitical tensions surrounding the Taiwan Strait, with China regarding Taiwan as a renegade province.