TSMC expected to report sixth straight quarter of record profit thanks to AI boom

Taiwan Semiconductor Manufacturing Co (TSMC), the world's largest producer of advanced AI chips, is poised to report a sixth consecutive quarter of record profits, fueled by robust infrastructure spending within the tech sector. Analysts emphasize the enduring demand for TSMC's AI chipmaking capacity, as well as its state-of-the-art CoWoS chip packaging technology, which has propelled the company to unprecedented heights.

With a market capitalization nearly double that of South Korean counterpart Samsung Electronics, TSMC has surged to new heights, with its shares up 63% this year.

TSMC is set to announce a staggering 65% increase in third-quarter net profit to T$746.3 billion ($23.4 billion), according to a LSEG SmartEstimate based on input from 16 analysts. An earnings call to provide fourth-quarter and updated full-year guidance is scheduled for 0600 GMT. Any results exceeding T$706.56 billion would represent the company's highest-ever quarterly net income and its 11th consecutive quarter of profit growth.

In late October, Morgan Stanley analyst Charlie Chan projected TSMC's full-year revenue growth forecast to range between low-to-mid 40% from its current estimate of more than 40%, driven by robust demand for its 3-nanometre chips. Earlier this year, TSMC announced a $265 billion investment to construct chip factories in Arizona, including an additional $100 billion revealed in July.

Reuters reported last month that the company was considering a potential investment in Texas, with Tesla CEO Elon Musk suggesting his company would build and operate the Terafab AI chip complex, with TSMC potentially subleasing a portion of it.

Analysts anticipate TSMC to address questions surrounding its expansion plans in Texas. While Phelix Lee, senior equity analyst at Morningstar, acknowledges the strategic value of Texas as a possible expansion location in the 2030s or 2040s due to its existing semiconductor ecosystem and talent pool, he believes the urgency for such an expansion may be limited given the ongoing development of its Arizona site.

Despite raising its full-year capex forecast to $60 billion to $64 billion, TSMC's shares have gained 63% so far this year, in line with the broader market's 69% rise.