TSMC Sales Surge, Fueling Optimism for AI Growth in 2025

Taiwan Semiconductor Manufacturing Co. (TSMC) reported a 39% year-on-year revenue increase for the October-December quarter, surpassing analyst expectations and reinforcing optimism about the continued growth of artificial intelligence (AI) hardware demand in 2025. The world’s largest contract chipmaker posted revenue of NT$868.5 billion ($26.3 billion), beating the average estimate of NT$854.7 billion, according to Bloomberg calculations.

The strong performance underscores TSMC’s pivotal role in the global AI boom, as it manufactures advanced chips for tech giants like Nvidia Corp. and Apple Inc. The company’s 2024 revenue grew 34% to NT$2.9 trillion, marking its highest annual sales since going public in 1994. TSMC’s market value nearly doubled last year, reaching close to $1.1 trillion in U.S. trading.

“TSMC has benefited significantly from the strong demand for AI,” said Brady Wang, associate director at Counterpoint Research. He noted that capacity utilization for TSMC’s most advanced 3-nanometer and 5-nanometer chips has consistently exceeded 100%, driven by demand for AI graphics processing units (GPUs) and other AI-related semiconductors.

Despite the positive results, some investors remain cautious. TSMC’s quarterly revenue was only 1.6% above the average estimate and fell short of the most bullish projections. Analysts point to potential challenges, including over-building, power shortages, and the lack of a “killer” AI application to fully utilize server capacity.

TSMC’s upcoming earnings report on Jan. 16 will provide further insights into its outlook for 2025. Analysts expect the company to address key areas, including its CoWoS advanced-packaging capacity, progress on its U.S. Arizona fab, and capital-spending plans for its next-generation N2 node. Morgan Stanley predicts TSMC will project annual sales growth in the low-20% range in dollar terms.

Beyond AI, TSMC faces broader challenges, including its reliance on Apple’s iPhone business and geopolitical uncertainties. The company is also expanding internationally, with plans for new plants in Europe, Japan, and Germany, alongside ongoing construction in Arizona. TSMC anticipates increasing its capital expenditure in 2025 from the $30 billion spent in 2024, signaling confidence in the continued demand for advanced semiconductors.