TSMC surpasses first-quarter revenue and profit projections thanks to robust demand for AI chips.

1. Net revenue: 592.64 billion New Taiwan dollars ($18.87 billion), vs. NT$582.94 billion expected

2. Net income: NT$225.49 billion, vs. NT$213.59 billion expected

TSMC posted a 16.5% increase in net revenue compared to a year ago, reaching NT$592.64 billion, with net income rising by 8.9% to NT$225.49 billion. Projections for first-quarter revenue range between $18 billion and $18.8 billion.

As the world’s largest manufacturer of cutting-edge processors, TSMC serves clients such as Nvidia and Apple.

Brady Wang, associate director at Counterpoint Research, emphasized TSMC's advantageous position in light of prevailing industry trends. The sustained demand for sophisticated chips, particularly those tailored for AI applications, bodes well for both short-term and long-term prospects. Additionally, Wang noted the company's focus on advancing chip technology, exemplified by the transition to 3nm architecture, as a key driver of future growth.

TSMC is presently engaged in the production of 3-nanometer chips and aims to initiate mass production of 2-nanometer chips by 2025. Shrinking nanometer sizes typically result in more potent and efficient chips.

The surge in demand for AI chips, propelled by the proliferation of expansive language models like ChatGPT and Chinese equivalents, has propelled TSMC's shares by 56% over the past year.

According to Counterpoint Research data, TSMC accounted for 61% of global foundry revenue in the fourth quarter, while Samsung Foundry held 14% of the market.

Grzegorz Drozdz, market analyst at Conotoxia, highlighted TSMC's robust competitive position, underscored by its historically high net profit margin of 40%, compared to an industry average of 14%. This margin boost is attributed to an increased proportion of sales from 7nm and smaller chips, which command significantly higher margins.

TSMC's Arizona subsidiary recently received preliminary approval for government funding from the U.S., totaling up to $6.6 billion, to develop cutting-edge semiconductor technology. Additionally, the company is eligible for approximately $5 billion in proposed loans.

Following a recent earthquake, the strongest in Taiwan in 25 years, initial inspections revealed normalcy at TSMC's construction sites. However, some fab workers were briefly evacuated before resuming their duties.