TSM Leads the Semiconductor Surge with Record Profits and AI-Driven Growth

Taiwan Semiconductor Manufacturing Company (TSM), the world’s largest contract chipmaker, delivered exceptional fourth-quarter results, signaling its continued dominance in the semiconductor industry.

The company reported record net income of NT$374.68 billion ($11.3 billion), a 57% year-over-year increase, driven by robust demand for its cutting-edge 3-nanometer and 5-nanometer chip technologies. Total revenue surged 38.8% year-over-year to NT$868.46 billion ($26.36 billion), with AI accelerators and high-performance computing (HPC) leading the charge.

TSM's Chairman and CEO, C.C. Wei, emphasized the transformative role of artificial intelligence (AI) in driving growth. AI-related chips accounted for a mid-teens percentage of the company's total 2024 revenue, with expectations of sustained growth at a mid-40% compound annual growth rate (CAGR) over the next five years. Advanced 3-nanometer chips contributed 26% of wafer revenue, underscoring the company’s technological edge.

AI Momentum Boosts Nvidia and the Broader Sector
Nvidia (NVDA), one of TSM’s key clients, is riding the wave of AI-driven demand. The chipmaker relies on TSM’s advanced CoWoS packaging technology for its high-performance AI chips, including the next-generation Blackwell GPUs. Nvidia shares rose 0.9% on Thursday, adding to a 3.4% gain on Wednesday following a favorable U.S. inflation report. Analysts remain bullish on Nvidia, with expectations of $172 billion in data-center revenue in 2025, largely driven by AI infrastructure sales.

Despite concerns about a potential slowdown in CoWoS orders, Wei assured investors that demand remains strong, reinforcing the strategic importance of TSM’s partnership with Nvidia. This collaboration exemplifies the symbiotic relationship between chip designers and manufacturers in meeting surging AI demand.

Navigating Challenges: Geopolitics and Growth Outlook
While TSM's financial performance highlights its resilience, the company faces challenges, including geopolitical tensions and evolving U.S. export restrictions. The Biden administration's recent measures aim to curb the flow of advanced chips to Chinese customers, requiring stricter customer scrutiny by chipmakers like TSM.

Despite these headwinds, TSM projects a strong 20% CAGR for overall revenue growth over the next five years. Its capital expenditures are set to rise by 34% in 2025, reaching up to $42 billion, as it scales up manufacturing capacity for 5G, AI, and HPC technologies. The company’s Arizona fab achieved high-volume production using 4-nanometer technology, signaling its commitment to geographic diversification and operational excellence.

The Road Ahead
TSM's record-setting quarter underscores its pivotal role in powering the AI revolution. With robust demand for advanced chips and strategic investments in innovation, the company is well-positioned to maintain its leadership in the semiconductor industry. As AI adoption accelerates, TSM’s strong partnership with industry giants like Nvidia will remain a critical driver of growth, even amid geopolitical uncertainties. For investors, the company’s unwavering focus on technological advancement and scalability makes it a cornerstone of the global tech ecosystem.

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