TSMC stock rallies on upbeat Q3 earnings fueled by strong AI chip demand
Taiwan Semiconductor Manufacturing Co. will begin full volume production at its north Phoenix fab earlier than expected as the company is seeing “extremely robust” AI-related chip demand.
In the company’s Oct. 17 earnings call after releasing its third quarter financial results, TSMC CEO C.C. Wei said the company has made “significant progress” on its Arizona fab site over the past several months and will begin mass production at its first fab at the beginning of 2025. TSMC previously planned to begin volume production at the fab in the first half of 2025.
TSMC’s Arizona fab began engineering wafer production in April with N4 process technology. Wei described the results as “highly satisfactory” with a “very good yield.” Last month, the fab reached a trial production rate that’s on par with TSMC’s Fab 18 in Tainan, Taiwan, the Business Journal previously reported.
“This is an important operational milestone for TSMC and our customers, demonstrating TSMC’s strong manufacturing capability and execution,” Wei said. “We now expect volume production of our first fab to start in the beginning of 2025 and are confident to deliver the same level of manufacturing quality and reliability from our fab in Arizona, as from our fabs in Taiwan.”
Although TSMC moved up its full volume chip production start date for its first fab, the company still expects operations for its second fab to begin in 2028 and production to begin at its third fab by the end of the decade. The company’s second fab will produce 2 and 3 nanometer process technologies for customers that include AMD, Apple, Nvidia and Qualcomm.
“Thus, TSMC will continue to play a critical and integral role in enabling our customers’ success, while remaining a key partner and enabler of the U.S. semiconductor industry,” Wei said on the earnings call.
TSMC’s Arizona fabs are expected to eventually employ more than 6,000 workers, up from the 4,500 it initially anticipated.
To date, the company has hired 2,200 workers at its Arizona fab site, a TSMC spokesperson told the Business Journal.
TSMC stock soars on upbeat Q3 earnings
Shares of TSMC soared by as much as 12% after the chipmaker reported Q3 results that exceeded Wall Street expectations due to strong demand for artificial intelligence chips.” TSMC’s stock closed Thursday at $205.84 a share, up 9.8%.
Customer demand continues to rise for TSMC’s 3-nanometer and 5-nanometer chips used in AI applications and the company expects AI-related revenue to more than triple in 2024, Wei said.
TSMC generated $23.5 billion in revenue during the third quarter, up 36% from the prior year. The company’s third quarter revenue exceeded its previous forecast, which was between $22.4 billion to $23.2 billion.
TSMC expects to generate between $26.1 billion and $26.9 billion in revenue in the fourth quarter.
“Moving into fourth quarter, we expect our business to continue to be supported by strong demand for our leading-edge process technologies,” Wei said. “We continue to observe extremely robust AI-related demand from our customers throughout the second half of 2024, leading to increasing overall capacity utilization rate for our leading-edge 3-nanometer and 5-nanometer process technologies.”
Other chipmakers saw their stocks rally in response to TSMC’s positive financial results and upbeat outlook.
Shares of Nvidia — a TSMC customer — reached an all-time high of $140.89 a share on Thursday, later closing the trading day at $136.93. Intel Corp. shares saw a small bump, gaining 13 cents to close at $22.44, after announcing this week it would lay off some 1,300 U.S. workers, including hundreds in Arizona.