TSMC profit surges to record high on AI chips boom; China concerns dismissed

Updates with Q4 guidance, management commentary on China 

Investing.com - Taiwan Semiconductor Manufacturing Co. clocked a record-high third-quarter profit on Thursday as the world’s biggest contract chipmaker continued to see outsized demand for artificial intelligence infrastructure.

TSMC also forecast a continued increase in AI-fuelled demand, and dismissed investor concerns over trade ructions stemming from a U.S.-China conflict. 

TSMC reported a net profit of T$452.30 billion ($14.75 billion) for the three months to September 30. The figure was higher than a Reuters/LSEG estimate of T$417.7 billion, and was the company’s strongest ever quarterly profit. 

Markets were primed for a solid reading, after TSMC disclosed a 30% spike in its quarterly revenue last week. Revenue rose to T$989.92 billion ($32.30 billion), while gross margin stood at 59.5%. 

TSMC sees AI demand remaining strong, dismisses China concerns  

TSMC CEO C.C. Wei struck a largely positive tone on expectations of AI-fuelled demand, which is expected to remain strong in the coming quarters. 

Wei also dismissed concerns over potential sales headwinds from the U.S. blocking chip sales to Chinese markets. 

"We continue to observe robust AI-related demand throughout 2025… The explosive growth in token volume demonstrated increasing consumer AI model adoption, meaning more computation is needed," Wei said in a post-earnings call, noting that this was likely to underpin demand for semiconductors. 

"I have confidence in my customers," Wei said when responding to an an analyst question regarding potential Chinese headwinds.

"If the China market is not available, I still think the AI growth will be very positive," Wei said, adding that he remained confident a compound annual growth rate of 40% or higher could be maintained even if Chinese markets were blocked out. 

Chinese chip sales became a point of contention this year, as the U.S. used chip export controls as a major bargaining chip in an ongoing trade conflict with the world’s second-largest economy.

Beijing had responded by dissuading local AI developers from importing U.S.-made chips, as part of an "AI Plus" strategy aimed at promoting self-reliance across the full stack of AI development. 

Concerns over China came to a head this week after U.S. President Donald Trump threatened to impose triple-digit tariffs against the country. 

Wei noted that enterprise AI and increasing sovereign AI efforts were also expected to support chip demand. The TSMC CEO forecast 2025 revenue growth at around mid-30%.  

TSMC CFO Wendell Huang forecast fourth-quarter revenue of $32.2 billion to $33.4 billion, while gross margin is expected between 59% and 61%. 

Huang said that the company will continue to ramp up production at its overseas operations, although this was likely to dilute the company’s gross margin by 1% to 2% in the coming years. 

Huang also slightly hiked TSMC’s 2025 capital expenditure outlook, to a range of $40 billion-$42 billion from $38 billion- $42 billion. 

TSMC earnings on a tear amid data center buildouts

TSMC clocked its seventh consecutive quarter of profit growth, as the chipmaker continued to benefit from rapidly growing demand for AI chips and infrastructure. 

Multi-billion dollar data center projects by AI majors such as OpenAI, SoftBank Group Corp. (TYO:9984), and Oracle Corporation (NYSE:ORCL), coupled with continued buildouts by other tech majors, all factored into strong demand for TSMC’s advanced chips. 

Asia’s most valuable listed company, TSMC is a key supplier to AI major Nvidia (NASDAQ:NVDA) and iPhone-maker Apple and considered to be a bellwether for AI chip demand. 

Chipmaking equipment maker ASML Holding NV (AS:ASML), another bellwether for the industry, released strong third-quarter earnings earlier this week, but warned that demand from China was expected to deteriorate sharply. 

TSMC has benefited greatly from a boom in AI-linked chip demand over the past two years, which largely offset laggard sales in consumer electronics and other sectors. Executives said they expected a mild recovery in non-AI chip sectors in the coming quarters. 

In a note, analysts at Morgan Stanley lifted their price target for Taiwan-listed TSMC shares by T$1,000 to T$1,688.00, citing the company’s "strong results and positive AI semiconductor outlook."

U.S.-listed shares of TSMC were higher by more than 1.9% in premarket U.S. dealmaking on Thursday.

(Scott Kanowsky contributed reporting.)