Investing.com-- Taiwan Semiconductor Manufacturing Co, or TSMC (TW:2330), reported a stronger-than-expected profit in the second quarter, as it continued to see stellar demand for semiconductors from the artificial intelligence industry.
The report sent the company's U.S.-listed shares rising around 2% at the market open on Thursday.
The world’s largest contract chipmaker forecast slightly higher capital expenditure for the year, citing the need to constantly increase production capacity and technology development in the face of outsized demand from AI.
But this increased demand is also expected to boost revenues more than initially expected, with the chipmaker presenting a strong outlook for the current quarter and also slightly hiking its 2024 revenue guidance.
TSMC posted a net profit of T$247.85 billion ($7.6 billion), compared to Reuters expectations for a profit of T$236.1 billion.
The firm, which ranks technology giants NVIDIA Corporation (NASDAQ:NVDA) and Apple Inc (NASDAQ:AAPL)L among its clients, had earlier in July posted stronger-than-expected revenue for the second quarter, which jumped 40% to T$673.51 billion ($20.65 billion).
Third-quarter revenue is expected between $22.4 billion and $23.2 billion, CFO Wendell Huang said in a post-earnings call. Huang said TSMC's annual capital expenditure was now expected between $30 billion and $32 billion dollars, with the lower end of the range up slightly from prior estimates of $28 billion.
Annual revenue is expected to grow in the mid-20% range, CEO C.C. Wei said in a post-earnings call, slightly higher than prior estimates for growth in the low-20%.
"AI continues to drive leading edge strength with supply/demand imbalance to continue until 2026 it seems," Barclays analysts said in a post-earnings note, reiterating an Overweight rating on the stock.
They added that the tightened capex forecast "could disappoint semi-cap bulls but in line with our expectations."
Earlier this year, TSMC suggested that it would implement pricing increases for all customers. However, in the latest comments, management indicated that some customers might face steeper price hikes than others.
According to Needham analysts, foundry wafer prices have historically been transparent and largely uniform across customers. They said the new comments from TSMC are the first confirmation that it will exercise pricing discrimination, "which likely marks a positive deviation from its long-standing pricing strategy."
"We believe this will help TSMC capture a larger piece of the AI pie when AI is structurally improving TSMC customers' profitability," Needham added.
TSMC benefited greatly from surging AI demand over the past year, as a slew of tech giants raced to roll out their own offerings after the success of OpenAI’s ChatGPT.
This saw a bulk of TSMC’s revenue come from “advanced technologies,” which consist of wafer sizes of 7-nanometre and above.
TSMC saw a stellar rise in valuation over the past year on strong demand from AI, which also saw the firm’s American Depository Receipts (NYSE:TSM) reach a total market capitalization of over $1 trillion.
The firm is also considered a bellwether for the global chipmaking industry, given that it has the highest capacity for producing advanced chips in the industry. The firm is currently spending billions on building new facilities in the U.S. state of Arizona.