Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker, has reported exceptional third-quarter results driven by robust demand for artificial intelligence chips, even as questions persist about AI’s return on investment. The chip giant posted a 54% surge in net profit to a record $10.1 billion (325.3 billion New Taiwan Dollars), significantly exceeding analyst expectations of 300.2 billion New Taiwan dollars.
TSMC’s third-quarter revenue climbed 36% to $23.5 billion, beating its own forecast range of $22.4 billion to $23.2 billion. Looking ahead, the company projects fourth-quarter revenue between $26.1 billion and $26.9 billion, representing substantial growth from $19.6 billion in the same period last year. The Taiwanese semiconductor manufacturer’s stock has surged nearly 75% year-to-date, trading near all-time highs despite closing slightly lower on Thursday.
The blockbuster results come at a critical moment for the AI industry, following disappointing guidance from Dutch chip equipment maker ASML, a key TSMC supplier, which triggered a sell-off in chip stocks earlier this week. During Thursday’s earnings call, analysts immediately questioned whether an AI bubble was forming. TSMC Chairman and CEO CC Wei firmly dismissed these concerns, stating that AI demand “is real” and citing tangible productivity gains from the company’s own use of AI and machine learning in its fabrication facilities and R&D operations.
“We cannot be the only one company that has benefited from AI applications,” Wei emphasized, adding that “the demand trend has just started.” His confidence appears justified by market reaction, with TSMC’s American Depositary Receipts jumping over 7% in after-hours trading on the New York Stock Exchange following the earnings announcement.
The strong performance contrasts sharply with ASML’s struggles. The equipment maker slashed its 2025 sales guidance on Tuesday, causing its stock to plummet 16% in its largest single-day drop in 26 years. ASML CEO Christophe Fouquet acknowledged that while AI developments remain strong, “other market segments are taking longer to recover.” The company also faces headwinds from US export restrictions on China, which accounted for about a quarter of ASML’s 2023 sales. However, analysts like Andy Li from CreditSights maintain that ASML’s guidance adjustment doesn’t signal weakening AI demand, calling concerns about near-term AI chip demand premature.
Key Quotes
We cannot be the only one company that has benefited from AI applications. The demand trend has just started.
TSMC Chairman and CEO CC Wei made this statement during the company’s earnings call when asked about potential AI bubble concerns, emphasizing that AI demand is real and sustainable based on the company’s own productivity gains from AI implementation.
While there continue to be strong developments and upside potential in AI, other market segments are taking longer to recover.
ASML CEO Christophe Fouquet explained why his company slashed 2025 guidance despite strong AI trends, highlighting that the semiconductor industry’s recovery remains uneven across different applications beyond AI.
I don’t think you can view this as having meaningful read-through to near-term demand for AI, though order growth expectations for ASML were a bit too aggressive and valuation stretched.
Andy Li, senior analyst at CreditSights, provided perspective on ASML’s guidance cut, arguing that it reflects company-specific issues rather than weakening AI chip demand, offering reassurance to investors concerned about the broader AI market.
Our Take
TSMC’s exceptional results provide the clearest evidence yet that AI chip demand has moved beyond hype into sustained commercial reality. The 54% profit surge and confident forward guidance directly counter the narrative of an AI bubble, particularly significant given the timing after ASML’s disappointing outlook spooked markets.
What’s particularly noteworthy is CEO Wei’s emphasis on tangible ROI from AI applications within TSMC’s own operations. This insider perspective from a company at the heart of AI chip production carries substantial weight in debates about AI’s practical value. The divergence between TSMC and ASML also reveals how geopolitical factors, particularly China export restrictions, are reshaping the semiconductor landscape independently of underlying AI demand.
The market’s enthusiastic response—7% after-hours surge—suggests investors are betting that AI infrastructure spending will continue driving semiconductor growth well into 2025, validating the massive capital investments by hyperscalers and potentially triggering another wave of AI-focused investment.
Why This Matters
TSMC’s record-breaking earnings provide crucial validation for the AI infrastructure investment boom at a time when skepticism about AI’s return on investment has intensified. The results demonstrate that demand for AI chips remains robust despite broader economic uncertainties and market volatility in the semiconductor sector.
The contrast between TSMC’s success and ASML’s struggles highlights the uneven impact of AI adoption across the technology supply chain. While chip manufacturers directly serving AI applications are thriving, equipment makers face challenges from geopolitical tensions and slower recovery in non-AI segments. This divergence suggests the AI revolution is creating winners and losers even within closely related industries.
For businesses and investors, TSMC’s performance indicates that AI infrastructure spending continues to accelerate, supporting the massive capital expenditures by tech giants like Microsoft, Google, and Amazon on AI data centers. The company’s firsthand experience with AI-driven productivity gains also provides tangible evidence that AI investments can deliver measurable returns, potentially alleviating concerns raised by Goldman Sachs and other analysts about whether AI spending will ever pay off. As the primary manufacturer for companies like Nvidia and Apple, TSMC’s outlook serves as a bellwether for the entire AI ecosystem.
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