Q3 net profit may increase 65%! TSM.US (TSM.US)'s profit “six consecutive championships” are in sight, and the AI infrastructure feast is not over

The Zhitong Finance App learned that TSMC, the world's largest manufacturer of advanced AI chips, is expected to announce a record profit for the sixth consecutive quarter, driven by a boom in infrastructure spending in the technology industry.

Analysts said that market demand for TSMC's AI chip manufacturing capacity and its advanced chip packaging technology CowOS is still strong. This has propelled the market capitalization of Asia's highest company by market capitalization, Nvidia and Apple's key suppliers to new highs. Its current market value is about 2.1 trillion US dollars, almost double that of South Korean rival Samsung Electronics.

According to estimates from 16 analysts compiled by LSEG SmartTest, TSMC on Thursday announced that net profit for the third quarter surged 65% to NT$746.3 billion (US$23.4 billion). This estimate focuses more on analysts with stable forecast accuracy. TSMC will hold an earnings conference call at 06:00 GMT (14:00 Beijing time) to provide guidance for the fourth quarter and the updated full year.

If net profit exceeds NT$706.56 billion, TSMC's quarterly net profit will reach a record high and achieve the 11th consecutive quarterly profit increase. Last Thursday, TSMC announced a 50% year-on-year increase in revenue for the third quarter, exceeding market expectations and reaching a record high.

Morgan Stanley analyst Charlie Chan said in an October 6 report that, driven by strong demand for 3-nanometer chips, TSMC is expected to raise its annual revenue growth forecast from the current “over 40%” to the mid to low 40% range.

Texas expansion prospects

TSMC is investing 265 billion US dollars to build a chip factory in Arizona, USA, including an additional $100 billion investment announced in July. It was reported in September that TSMC is evaluating potential investments in Texas. Tesla CEO Musk also said last week that his company will build and operate the Terafab AI chip complex, and TSMC may sublease part of it.

Analysts expect TSMC to respond to questions about potential expansion plans in Texas. Charlie Chan said in the report that given growing customer demand and limited space at the Arizona site after five years, expansion in Texas may be necessary. However, Morningstar senior stock analyst Phelix Lee believes that the urgency of TSMC's expansion into Texas is limited because part of its planned Arizona fab has yet to be built.

“Given Texas' long-standing semiconductor ecosystem and talent pool, Texas is a great location to expand ambitious plans in the 2030s or 2040s,” Lee said. “This may be a hanging carrot for a pre-emptive response to potential US trade and other policies.”

At the July earnings conference call, TSMC raised this year's capital expenditure forecast from the high-end range of 52 billion to 56 billion US dollars to 60 billion to 64 billion US dollars. TSMC's Taipei-listed shares have risen 63% since this year, roughly in sync with the 69% increase in Taiwan's weighted index.