Taiwan Semiconductor Manufacturing Company (TSMC) has delivered blockbuster quarterly earnings that underscore the explosive growth in artificial intelligence chip demand. The world’s largest contract semiconductor manufacturer reported net income of $11.6 billion (NT$374.68 billion) for the October-December quarter, representing a remarkable 57% year-over-year increase. Revenue surged 37% annually to $26.88 billion and climbed 14.4% from the previous quarter.
The standout revelation came from CEO C.C. Wei, who announced that TSMC expects its AI accelerator revenue to double in 2025, following a tripling of this revenue stream in 2024. AI accelerators encompass the specialized chips that power compute-intensive AI models, and TSMC manufactures these critical components for industry giants including Nvidia, Apple, and AMD.
TSMC’s success is heavily concentrated in advanced semiconductor technologies. Nearly three-quarters of the company’s wafer revenue came from what it classifies as “advanced technologies”—chips measuring 7 nanometers or smaller. The company’s most cutting-edge offerings, 3-nanometer and 5-nanometer chips, drove particularly strong demand. These ultra-advanced chips are essential for next-generation AI applications, including Nvidia’s flagship Blackwell AI chip, which utilizes TSMC’s 4-nanometer manufacturing process.
CFO Wendell Huang noted that while the company expects smartphone seasonality to impact first-quarter 2025 results, this will be “partially offset by continued growth in AI-related demand.” The revenue breakdown reveals AI’s growing dominance: 51% of TSMC’s 2024 revenue came from high-performance computing, while smartphones contributed 35%.
Addressing recent Biden administration export controls limiting AI chip flows to non-allied countries, CEO Wei characterized the impact as “not significant” and “manageable” for TSMC’s operations. Investor confidence remained strong, with TSMC shares jumping nearly 4% following the earnings announcement and showing gains of more than 90% over the past 12 months, reflecting Wall Street’s bullish outlook on the AI chip manufacturing sector.
Key Quotes
We forecast our revenue from AI accelerator to double in 2025, as a strong surge in AI-related demand continues.
TSMC CEO C.C. Wei made this statement during an analyst call, revealing the company’s bullish outlook on AI chip demand. This projection is particularly significant given that AI accelerator revenue already tripled in 2024, indicating exponential growth in the AI hardware market.
Moving into first quarter 2025, we expect our business to be impacted by smartphone seasonality, partially offset by continued growth in AI-related demand.
CFO Wendell Huang provided this guidance in the earnings statement, highlighting how AI demand is becoming a stabilizing force for TSMC’s business, counterbalancing traditional cyclical patterns in consumer electronics. This demonstrates AI’s emergence as a primary revenue driver.
The impact of the rules on TSMC’s operations is ’not significant’ and would be ‘manageable.’
CEO C.C. Wei addressed concerns about new Biden administration export controls on AI chips to non-allied countries. This reassurance was important for investors worried about geopolitical risks affecting TSMC’s global customer base and production capabilities.
Our Take
TSMC’s results provide the clearest evidence yet that we’re witnessing a fundamental shift in semiconductor demand dynamics, with AI displacing traditional computing as the primary growth driver. The doubling projection for 2025 is particularly striking—it suggests major hyperscalers like Microsoft, Google, and Amazon are committing to massive AI infrastructure buildouts despite economic uncertainties. What’s most revealing is the concentration in advanced nodes: the fact that 3nm and 5nm chips are driving growth indicates that AI workloads require bleeding-edge technology, creating a widening gap between companies with access to these chips and those without. TSMC’s 90% stock surge reflects investor recognition that the company holds a near-monopoly on enabling the AI revolution. However, the geopolitical vulnerabilities—Taiwan’s precarious position and export control complexities—remain the elephant in the room that could disrupt this trajectory.
Why This Matters
TSMC’s extraordinary earnings report serves as a critical barometer for the entire AI industry, confirming that the AI boom is accelerating rather than plateauing. As the exclusive manufacturer of the world’s most advanced AI chips, TSMC’s forecast of doubled AI accelerator revenue in 2025 signals that major tech companies are dramatically scaling their AI infrastructure investments. This has profound implications for the AI arms race, where access to cutting-edge chips determines competitive advantage.
The concentration of revenue in advanced node technologies (3nm and 5nm) highlights the increasing computational demands of modern AI models, particularly large language models and generative AI systems. For companies like Nvidia, which relies entirely on TSMC for manufacturing, these results validate continued investment in next-generation AI hardware. The report also underscores geopolitical dimensions of AI competition, with TSMC’s Taiwan location and new US export controls creating strategic vulnerabilities. For businesses across sectors, TSMC’s capacity expansion and production priorities will directly impact AI deployment timelines and costs throughout 2025.
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Source: https://www.businessinsider.com/tsmc-earnings-ai-chip-demand-nvidia-2025-1