TSMC’s optimistic outlook fuels AI spending hopes for 2025

(Bloomberg) — Taiwan Semiconductor Manufacturing Co. (TSM, 2330.TW) forecast quarterly sales and capital spending above analyst estimates, fueling hopes that spending on AI hardware is expected to remain resilient in 2025.

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The main chipmaker of Apple Inc. (AAPL) and Nvidia Corp. (NVDA) plans to spend between $38 billion and $42 billion on technology and capacity this year, up to 19% more than analysts expected. It forecast revenue of between $25 billion and $25.8 billion for the March quarter, up to 6% above forecasts. Actions by TSMC suppliers, including Tokyo Electron Ltd. (TOELY, TKY.HA) and Advantest Corp. (ATEYY, 6857.T), have climbed in Asia.

TSMC’s strong performance has boosted optimism over an unprecedented AI spending cycle that has propelled companies like Nvidia to new heights. The advent of ChatGPT has sparked frenzied data center construction over the past two years, benefiting a host of companies that provide the pipes and brains of the AI ​​boom.

Yet until now, the lack of a big-profit-generating AI application has fueled concerns about a potential bubble. And like much of the industry, TSMC is grappling with uncertainties stemming from a technology conflict between the United States and China that threatens to disrupt supply chains and stem the flow of chips around the world. The United States this month announced new export control rules for AI chips to reduce their supply to China.

Away from AI, TSMC remains heavily dependent on consumer electronics and smartphones, given that Apple remains its largest customer. iPhone sales have proven to be subdued, although the industry expects mobile AI capabilities to expand over time, boosting the market as a whole.

On Thursday, CEO CC Wei warned that smartphone unit growth would remain below 10% in 2025. But he added that there would be a slight recovery in non-AI segments.

The world’s largest chipmaker reported a better-than-expected 57% increase in net profit.

“For the driver, in addition to the current strong demand for AI chips, there will be support for new smartphone chips and AI PCs, possibly more outsourcing orders from Intel and WiFi 7 chips,” Charles Shum said , analyst at Bloomberg Intelligence, on the revenue outlook for 2025.

What Bloomberg Intelligence says

TSMC may be able to keep more than half of its existing orders from China, following the Biden administration’s restrictions on advanced chip production for exempt chips from countries with fewer than 30 billion transistors , as reported by Bloomberg News. This would allow TSMC to maintain its sales of smartphone SoCs and mid-range computer chips for China. Chinese chip orders accounted for 12.6% of TSMC’s revenue between January and September.

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