TSMC Raises 2025 Outlook in a Big Boost for AI Demand Hopes
The world's biggest contract chipmaker on Thursday forecast sales growth of about 30% in US dollar terms this year, up from mid-20% previously. That reinforced expectations that tech firms from Meta Platforms Inc. to Google will keep spending to build the datacenters essential to artificial intelligence development. Nasdaq stock index futures swung to gains, while top supplier ASML Holding NV gained more than 2%.
TSMC's move underscores resilient demand for high-end chips from the likes of Nvidia Corp. and Advanced Micro Devices Inc., which is outpacing its production capacity. Chief Executive Officer C.C. Wei affirmed on Thursday that AI orders still run hot — seeking to dispel persistent speculation that tech firms may curtail spending. While he stressed that underlying AI demand is strengthening, the uncertainty around the Trump administration's tariffs merited caution.
This is 'supporting the AI value chain, and AI optimism still holds,' said Billy Leung, investment strategist at Global X ETFs in Sydney. 'For investors, TSMC results again ease fears of an AI slowdown. Margins hold, demand outlook good, generally reinforces the AI buildout is still well underway.'
Investors have piled back into AI-linked companies, shaking off a funk that settled in after China's DeepSeek cast doubt on whether the likes of Amazon.com Inc. needed to spend that much money on data centers.
Last week, Nvidia became the first company in history to hit a $4 trillion valuation, underscoring investors' renewed enthusiasm for companies like TSMC that are key to building the infrastructure for AI.
TSMC wasn't hiking its outlook on news the US is prepared to grant Nvidia licenses to export its H20 AI chip to China, Wei told reporters. While that resumption in sales was positive for the industry, it was too early to quantify the impact, he added.
A day before TSMC's results, ASML triggered anxiety across markets by walking back its own growth forecast for 2026. Geopolitics and the global economy are sources of 'increasing uncertainty,' Chief Executive Officer Christophe Fouquet said. Its shares dropped more than 11%.
'Looking ahead to the second half of the year, we have not seen any change in our customers' behavior so far,' Wei said in Taipei. 'However, we understand there are uncertainties and risks' related to potential tariffs.
The appreciating Taiwanese dollar was also likely to depress its third-quarter business, Chief Financial Officer Wendell Huang said.
Taiwan's dollar has surged more than 11% this year, making it Asia's best performer, as foreign investors snapped up shares and exporters sold the greenback amid concerns the US currency would keep weakening. Huang estimated that every 1% appreciation of the Taiwanese dollar against the greenback will reduce the firm's revenue by 1%.
Still, TSMC was sticking with its margin outlook for now. 'Even with the unfavorable foreign exchange rate, we believe the long-term gross margin of 53% and higher remains well achievable,' Huang said.
TSMC upgraded its forecast after reporting a better-than-expected 61% jump in net income for the June quarter to NT$398.3 billion ($13.5 billion), keeping intact a streak of beating estimates every quarter since 2021. The company previously posted a 39% surge in revenue.
What Bloomberg Intelligence Says
TSMC's raised dollar sales-growth guidance (30% from mid-20%) on robust AI-chip demand and strong N3/N5 nodes sales still leaves 2025 sales of $117 billion below consensus' $124.9 billion. Near-term risks persist, with a 10% sequential sales dip in 4Q, we calculate, reflecting management's caution over US tariffs. Sustained Taiwan dollar appreciation will also continue to pressure gross margins.
- Charles Shum and Steven Tseng, analysts
Click here for the research.
Revenue from high-performance computing — which includes chips for servers and datacenters — now accounts for three-fifths of the company's revenue, a major change from when TSMC primarily rode the smartphone market. It remains the main chipmaker to Apple Inc.
The company is sticking with plans to spend $38 billion to $42 billion upgrading and expanding capacity this year. TSMC had earlier pledged to spend another $100 billion ramping up manufacturing in Arizona, Japan, Germany and back home in Taiwan.
TSMC is 'a timely boost to semiconductor sentiment heading into 2H25, amid broader concerns over sectoral tariffs and policy headwind,' said Allspring Global Investments's Gary Tan.
--With assistance from Dasha Afanasieva, Gao Yuan, Winnie Hsu, Vlad Savov, Cindy Wang and Rachel Yeo.
(Updates with shares, forex comments from the second paragraph.)
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