TSMC Reports Record Revenue Amid Slowing AI Chip Demand Growth

Taiwan Semiconductor Manufacturing Co. (TSMC) posts record monthly revenue in October, driven by AI chip demand. However, the growth rate shows signs of moderation, raising questions about the sustainability of the AI chip boom.

TSMC's October Performance: A Mixed Bag of Records and Slowdowns

Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chip maker, has reported a record-breaking monthly revenue for October 2024, highlighting the ongoing impact of the artificial intelligence (AI) boom on the semiconductor industry. However, the growth rate has shown signs of moderation, raising questions about the sustainability of AI chip demand.

Record-Breaking Revenue

TSMC's October sales reached an unprecedented NT$314.2 billion ($9.8 billion), marking the first time the company has surpassed the NT$300 billion threshold in monthly revenue 12. This achievement underscores the company's dominant position in the global semiconductor market and its crucial role in supplying chips for AI applications.

Growth Rate Moderation

Despite the record-breaking figures, TSMC's year-over-year growth rate for October stood at 29.2%, the slowest pace since February 1. This represents a notable deceleration compared to the consistent 30%+ growth rates observed between March and September 2024. The slowdown has prompted industry observers to reassess the long-term trajectory of AI chip demand.

AI's Continued Influence

TSMC's Chief Executive, C.C. Wei, remains optimistic about the AI sector's impact on the company's performance. During an October earnings call, Wei projected that revenue from AI-related servers and processors would triple in 2024, accounting for approximately 15% of TSMC's total revenue 2. This forecast suggests that while growth may be moderating, AI remains a significant driver of TSMC's business.

Year-to-Date Performance and Future Outlook

The company's year-to-date revenue for January through October 2024 reached NT$2.340 trillion, representing a 31.5% increase compared to the same period in the previous year 2. This robust performance has bolstered investor confidence in TSMC's ability to capitalize on the AI trend.

Looking ahead, TSMC has provided guidance for the fourth quarter of 2024, projecting revenue between $26.1 billion and $26.9 billion, with an expected gross profit margin ranging from 57% to 59% 2. These projections suggest that while growth may be slowing, the company still anticipates strong demand for its advanced chip manufacturing capabilities.

Implications for the Tech Industry

As a key supplier to tech giants like Apple Inc. and Nvidia Corp., TSMC's performance serves as a barometer for the broader technology sector 1. The moderation in growth rate could signal a potential cooling in the AI chip market, prompting tech companies and investors to reassess their strategies and expectations for the coming year.