On Thursday, chip stocks experienced significant gains after Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s leading advanced chip producer, posted impressive earnings results, fueled by the growing demand in the AI sector.
Nvidia (NVDA) shares rose 2.5% in premarket trading, while AMD (AMD) and Broadcom (AVGO) saw increases of 3% and 1.9%, respectively.
Other major players in the semiconductor industry also followed suit. Intel (INTC) shares were up 1%, Qualcomm (QCOM) added 1.9%, and Micron Technology (MU) rose by 2.2%.
TSMC reported a 54% surge in net profit for the July-September quarter, largely driven by AI related demand, with net income reaching 325.3 billion Taiwanese dollars ($10.1 billion). This exceeded the 300.2 billion Taiwanese dollars expected by analysts, according to Reuters.
The company also saw third quarter revenue hit $23.5 billion, a 36% increase from the previous year. Additionally, TSMC’s gross margin improved to 57.8% compared to 54.3% in the same quarter last year.
In a statement, TSMC highlighted strong demand for smartphones and AI applications, supported by their industry leading 3nm and 5nm technologies. During an earnings call, CEO C.C. Wei emphasized that AI driven demand is both widespread and impactful, noting that TSMC has achieved substantial growth in this area.
Wei also mentioned that most major AI innovators are collaborating with TSMC, including hyperscaler clients developing custom chips.
TSMC now anticipates its capital expenditure to exceed $30 billion this year. The company’s capital spending reached $6.4 billion in the third quarter, slightly up from the previous quarter.
According to Paul Marino, Chief Revenue Officer at Themes ETFs, TSMC serves as a key indicator of the pace at which AI development and data centers are expanding, as well as the overall health of the chip supply chain.
TSMC’s stock, listed in Taipei, has surged nearly 80% this year, far outpacing the broader market’s gains of 28.57%.
TSMC’s strong performance has boosted investor confidence after European chipmaker ASML delivered weaker than expected forecasts, raising concerns about AI demand across the sector. Marino added that investors will be looking for strong guidance from companies like Nvidia and AMD as they release their earnings later in the quarter to support their current valuations.
