TSMC third-quarter profit seen jumping 40% on strong AI chip demand

Taiwan Semiconductor Manufacturing Co 2330.TW, the main producer of advanced chips used in artificial intelligence applications, is expected to report a 40 per cent leap in third-quarter profit on Thursday thanks to soaring demand.

The world's largest contract chipmaker, whose customers include Apple AAPL.O and Nvidia NVDA.O, has benefited from the surge towards AI.

TSMC TSM.N is set to report a net profit of T$298.2 billion ($9.27 billion) for the quarter ended Sept. 30, according to a LSEG SmartEstimate drawn from 22 analysts. SmartEstimates give greater weighting to forecasts from analysts who are more consistently accurate.

That estimate compares to the 2023 third-quarter net profit of T$211 billion.

TSMC last week reported a jump in third-quarter revenue as reported in Taiwan dollars, comfortably beating market expectations. The company gives its revenue outlook in US dollars at its earnings conference.

"Most of TSMC's major clients, including Apple , Nvidia, AMD AMD.O, Qualcomm QCOM.O and Mediatek 2454.TW are launching new products which heavily rely on TSMC's advanced process technologies," said Li Fang-kuo, chairman of President Capital Management.

"TSMC's Q3 earnings will exceed expectations by a lot," Li added.

TSMC, at its quarterly earnings call at 0600 GMT on Thursday, will update its outlook for the current quarter as well as for the full year, including its capital expenditure as it races to expand production.

TSMC is spending billions building new factories overseas, including $65 billion on three plants in the US state of Arizona, though it says most manufacturing will remain in Taiwan.

On its last earnings call in July, TSMC raised its full-year revenue forecast and adjusted its capital expenditure plans for this year to between $30 billion and $32 billion, compared with a previous forecast of $28 billion to $32 billion.

The AI boom has helped drive up the price of shares in Asia's most valuable company, with TSMC's Taipei-listed stock soaring 77 per cent so far this year, compared with a 28 per cent gain for the broader market .TWII.

Hsinchu-headquartered TSMC, colloquially referred to the "sacred mountain protecting the country" for its crucial role in Taiwan's export-oriented economy, faces little competition.

Once the dominant force in the semiconductor industry, five-decade-old Intel INTC.O is facing one of its worst periods as losses mount at the contract manufacturing unit it is building out in hopes of challenging TSMC.