TSMC reported strong earnings on Thursday, driving chip stocks higher in morning trading. TSMC rose 7%; ASML, Lam Research, and Broadcom rose 3%; Marvell Technology rose 2%; Super Micro Computer and Nvidia rose 1%.

TSMC reported a 57% leap in fourth-quarter profit on Thursday as demand surges for advanced chips used in artificial intelligence processing.

The world's largest contract chipmaker posted a net profit of T$374.68 billion ($11.4 billion) for the quarter ended Dec. 31, a record high for any quarter.

That was in line with the T$377.95 billion LSEG SmartEstimate drawn from 22 analysts. SmartEstimates give greater weighting to forecasts from analysts who are more consistently accurate.

Meanwhile, TSMC projected quarterly sales and capital expenditure ahead of analysts’ estimates, fueling hopes that spending on AI hardware should remain resilient in 2025.

The main chipmaker to Apple and Nvidia projected revenue of $25 billion to $25.8 billion in the March quarter, surpassing the $24.4 billion analysts predicted on average. The Taiwanese company foresees spending $38 billion to $42 billion on technology and capacity upgrades this year, exceeding the $35.2 billion estimate.

The strong performance is likely to buoy optimism that the AI spending cycle that drove TSMC and Nvidia to new heights will continue this year. The advent of ChatGPT spurred a frenzied datacenter build-out over the past two years, though the lack of a big profit-generating AI application so far has stoked concerns about a potential bubble.