TSMC set for another record quarter as AI spending lifts profit 65%

TSMC’s results act as a bellwether for the AI supply chain across Asian equities, and given the stock’s heft in Taiwan’s benchmark, the outlook could shift the index as much as the bottom line does. A boost to the full-year revenue growth target into the low-to-mid 40% range, something Morgan Stanley predicts, would strengthen the AI trade among chipmakers, server builders and equipment suppliers; any hesitation about fourth-quarter demand would pressure a sector that is already expensively valued. What TSMC says about capital spending and a possible Texas expansion would ripple into US chip-equipment stocks. Since TSMC shares have tracked the market’s rally this year, the hurdle for a positive response is elevated.

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TSMC is on a streak of record prints; Thursday’s session will show whether its outlook can keep step with what the market already prices in.

Summary:

• An LSEG SmartEstimate from 16 analysts puts the third-quarter net profit jump at 65%, to around T$746 billion ($23 billion).
• Any outcome above roughly T$707 billion would set a record and stretch profit growth to an 11th consecutive quarter.
• The earnings call, including fourth-quarter and full-year guidance, is set for Thursday at 06:00 GMT (2:00 am ET).
• Third-quarter revenue increased 50% from the same period a year earlier to a record, topping projections.
• Morgan Stanley sees TSMC raising its full-year revenue growth forecast into the low-to-mid 40% range.
• A possible Texas expansion is expected to come up in questions after Elon Musk said TSMC could sublease part of his Terafab complex.

Reuters reported that Taiwan Semiconductor Manufacturing Co is set to deliver its sixth straight record quarterly profit on Thursday, fueled by sharply higher technology-sector outlays on artificial intelligence infrastructure.

As the world’s biggest producer of advanced AI chips, TSMC is projected to register a 65% gain in third-quarter net profit, hitting roughly T$746 billion ($23 billion), based on an LSEG SmartEstimate from 16 analysts that assigns greater weight to forecasters with a strong track record. A figure exceeding around T$707 billion would mark the company’s best quarterly profit ever and a growth run of 11 quarters. Last week, TSMC said third-quarter revenue had climbed 50% year on year to an all-time high, exceeding estimates.

Analysts view demand as robust for both TSMC’s AI chipmaking capacity and CoWoS, the advanced packaging technology used to combine processors and memory into one high-performance unit, an essential part of producing AI accelerators. That strength has made TSMC, a key Nvidia and Apple supplier, Asia’s most valuable company at about $2.1 trillion in market value, nearly double Samsung Electronics, its South Korean rival.

Guidance takes centre stage. During the Thursday call at 06:00 GMT (2:00 am ET), management will present fourth-quarter and revised full-year projections. Morgan Stanley analyst Charlie Chan anticipates that TSMC will raise its full-year revenue growth forecast to the low-to-mid 40% range from the current more-than-40% level, citing solid demand for its 3-nanometre chips. TSMC raised its capital spending forecast for the year to between $60 billion and $64 billion in July.

Texas is also expected to be raised by analysts. TSMC is investing $265 billion in Arizona chip plants, and Reuters reported in September that a Texas investment was under consideration. Last week, Elon Musk said his companies would build and operate the Terafab AI chip complex, and TSMC could sublease part of the site. Chan said Texas could become necessary within five years because of demand and constrained space in Arizona, though another equity analyst considered it a longer-term option and saw no great urgency as some planned Arizona fabs are still to be built.

TSMC’s Taipei-listed shares have gained 63% this year, roughly matching the 69% advance in Taiwan’s broader market, so guidance is the most probable driver of how the stock trades next.