Taiwan Semiconductor Manufacturing Co. (TSMC) reported better-than-expected profit and raised its revenue forecast for the year, signaling that strong demand for artificial intelligence chips continues despite uncertainties caused by the conflict in the Middle East.
The world’s largest contract chipmaker, a crucial supplier to technology giants such as Nvidia and Apple, now expects annual revenue growth of more than 30%, up from a previous projection of around 30% in US dollar terms. For the current quarter, TSMC forecast revenue of between $39 billion and $40.2 billion, which would be a new record.
Taiwan’s largest company also said it expects capital investment to be in the upper range of its spending forecast of between $52 billion and $56 billion, underscoring its confidence in the future of AI.
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“Demand remains robust,” said TSMC Chairman and CEO CC Wei on Thursday, 16th, citing consultations with customers. “They gave us a very positive outlook.”
The improved projection and TSMC’s investment plan show that demand for AI chips has not been affected by the conflict in the Middle East and the resulting interruption in energy supplies.
“Companies looking to expand AI infrastructure are not reducing spending. On the contrary, they are accelerating it,” said Josh Gilbert, market analyst at eToro.
Investors had worried that prolonged tensions in the Middle East could put TSMC’s production lines at risk, as Taiwan relies heavily on imported fuel for electricity generation and advanced chip manufacturing is energy-intensive.
Additionally, outages in Qatar have already cut off about a third of the world’s supply of helium, a byproduct of natural gas production used as a refrigerant in the production of high-performance chips.
Last week, Cliff Hou, senior vice president of TSMC and president of the Taiwan Semiconductor Industry Association, called on Taiwan to increase strategic reserves and diversify purchasing channels for helium and natural gas to ensure stable supply.
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TSMC Chief Financial Officer Wendell Huang on Thursday sought to allay concerns about fuel shortages, saying the company does not expect production disruption in the near term as Taiwan has secured sufficient supplies of liquefied natural gas until at least May.
Huang stated that the company is also purchasing special gases, such as helium and hydrogen, from different suppliers and regions, adding that this will not have a relevant impact on chip production either.
In the first quarter, TSMC’s net profit soared 58% to 572.48 billion Taiwan dollars, equivalent to US$18.12 billion, above market expectations. Revenue jumped 35% to a record 1.134 trillion Taiwan dollars.
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Gross margin rose to 66.2%, up 7.4 percentage points from the previous year, showing that TSMC is more than capable of offsetting cost pressures with elevated demand.
TSMC shares were volatile in the first few months of the year, reflecting the uncertainty caused by the war in Iran. The Taipei-listed stock rose more than 25% in January and February, driven by improving sentiment around a robust spending plan, but gave back about half of those gains in March after the outbreak of conflict in the Middle East.
TSMC shares have since recovered, closing at a new high on Thursday, as technology stocks rose broadly on the prospect of a U.S.-Iran peace deal that reopens the vital Strait of Hormuz shipping route. Source: Dow Jones Newswires.
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