(Bloomberg) — Taiwan Semiconductor Manufacturing Co .TSM, 2330. TW) projected quarterly sales and capital spending ahead of analyst estimates, fueling hopes that spending on AI hardware should remain resilient in 2025.
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The main chip maker for Apple Inc. (AAPL) and Nvidia Corp. (NVDA) predicts spending $38 billion to $42 billion on technology and capacity this year, or up to 19% more than analysts predicted. It forecast revenue of $25 billion to $25.8 billion in the March quarter, as much as 6% above projections. Shares in TSMC suppliers including Tokyo Electron Ltd. (TOELY, TKY.HA) and Advantest Corp. (ATEYY, 6857.T)spike in Asia.
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TSMC's strong performance fueled optimism around an unprecedented AI spending cycle that was driving the likes of Nvidia to new heights. The arrival of ChatGPT sparked a data center frenzy over the past two years, benefiting a host of companies that provide the brains and hubs of the AI boom.
Still, the lack of a major profit-generating AI application so far raised concerns of a potential bubble. And like much of the industry, TSMC is grappling with uncertainty stemming from a technology conflict between the United States and China that threatens to disrupt supply chains and halt the flow of chips around the world. The US this month announced new export control rules on AI chips to curtail their supply to China.
Away from AI, TSMC remains heavily dependent on consumer electronics and smartphones, given that Apple remains its biggest customer. iPhone sales have proven muted, although the industry expects mobile AI features to expand over time, driving the broader market.
On Thursday, CEO CC Wei warned that smartphone unit growth will remain in the low single digits in 2025. But he added that there would be a mild recovery in segments other than AI.
The world's largest chipmaker reported a better-than-expected 57% rise in net income.
“For the driver, apart from continued robust demand for AI chips, there will be support from new smartphone chips and AI PCs, possibly more outbound orders from Intel, and WiFi 7 chips,” said a Bloomberg intelligence analyst , Charles Shum, for 2025 revenue forecasts.
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TSMC may be able to keep more than half of its current orders from China, following the Biden administration's restrictions on advanced chip production for the country's exempt chips with fewer than 30 billion transistors, as reported by Bloomberg News . This would allow TSMC to maintain sales of smartphone SoCs and mid-range computing chips for China. Chinese chip orders accounted for 12.6% of TSMC's January-September revenue.