TSMC October Revenue Jumps 60% as AI Demand Remains Strong, but Regulatory and Financing Cost Concerns Weigh on Sentiment

Stock News
11/10

TSMC's monthly sales rose 60% year over year, underscoring the company's central role in global artificial intelligence infrastructure buildout.

The major chip foundry for Nvidia (NVDA.US) and Apple (AAPL.US) reported October revenue of NT$586.9 billion (approximately $17.9 billion). This growth rate accelerated further from the roughly 51% level in the September quarter. Analysts on average expect growth of 63% for the final three months of the year.

TSMC last month provided a revenue outlook that beat expectations, extending its scorching growth momentum in the post-ChatGPT era. However, investors are still digesting the long-term prospects for AI demand, given rising costs for financing the construction of expensive and resource-intensive data centers.

TSMC's stock price has fluctuated sharply along with the tech sector, hit by concerns that a sweeping Democratic victory in the U.S. midterm elections could lead to stricter regulation of the AI industry.

TSMC is a key bellwether for the industry because it manufactures chips for numerous technology companies. The company is betting on a fundamental transformation: it aims to build and equip approximately 20 factories in Taiwan Province of China and overseas, an unprecedented pace for a company that typically advances only four or five new fab projects simultaneously.

TSMC's stock has outperformed the industry average this year. Nevertheless, CEO C.C. Wei emphasized that the company remains in prudent expansion mode, scouting new production sites in Texas while negotiating a potential partnership with Elon Musk's Terafab chip manufacturing project.

To date, the company has successfully accelerated sales growth and sped up capacity expansion, and reiterated that capital expenditure this year will reach as high as $64 billion, a record high.

Analyst Charles Shum said that under his scenario assumptions, TSMC's earnings per share will come in 6% to 7% above market consensus for 2027 to 2028, driven by higher revenue and gross margins. Even with a $250 billion capacity buildout, its advanced process capacity will effectively be sold out by 2028, supporting price increases. As depreciation rises, AI growth slows, and supply catches up, upside will narrow in 2029.

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