New Delhi

Taiwan Semiconductor Manufacturing, the world's largest manufacturer of advanced chips, Thursday posted a phenomenal 54 per cent jump in net profit for its third quarter, sending shares soaring nearly 10 per cent during trading.

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The chip giant, which counts some of the best-known names in the industry as high-profile clients, including Apple and Nvidia, has proved itself to be a critical beneficiary of the spiking demand for chips primarily driven by increasing applications of artificial intelligence according to a detailed report by CNBC.

Actually, a good financial performance by TSMC happens at a time when the global chip makers are witnessing an increased demand due to the AI boom. The company now expects a rise in revenues in the last quarter of the year as it outlines a continued expansion process within the semiconductor industry.

Other chip makers' shares also surged after TSMC's earnings release. Nvidia, Micron, and AMD all rose around 1 per cent in Thursday's market close following investor responses to the market's optimistic outlook.

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Outperformance: Third quarter beats estimates

The company's revenues for the third quarter came in at $23.5 billion and marked a 36 per cent increase year-over-year, it said, according to the report. TSMC's net income also hit 325.3 billion New Taiwan dollars ($10.1 billion) against the LSEG estimate of NT$300.2 billion for the July-September quarter, said the media outlet. In contrast, the gross margin of TSMC improved to 57.8 per cent from 54.3 per cent during the same period last year.

Taiwan Semiconductor Manufacturing Company Chief Financial Officer Wendell Huang said he is confident about the future performance of the company. "Based on the current business outlook, we expect fourth-quarter revenue to be between $26.1 billion and $26.9 billion, representing a 13 per cent sequential increase or a 35 per cent year-over-year increase at the midpoint," Huang said in an earnings call, according to a FactSet transcript.

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The good third quarter was driven by healthy demand for TSMC's 3nm and 5nm technologies, which are particularly necessary for smartphones and AI-related applications. "Our business was supported by strong smartphone and AI-related demand," TSMC noted in a statement.

AI demand and future prospects

TSMC Chairman and CEO C.C. Wei emphasized the growing significance of AI in the semiconductor industry. Speaking during the earnings call, Wei said the demand for AI is "real," and that the growth experienced by TSMC was "the deepest and the widest" compared with others in the industry. He also added that almost every major AI innovation comes from a hyperscaler building its own chip, and they all work with TSMC.

The company's shares have gone up by about 80 per cent year-to-date and are above the overall market rise by 28.57 per cent in the same period.

The Taiwanese-based company, TSMC, has upgraded its book on the capital expenditure (capex) for the year and states that it will marginally surpass $30 billion. The cost of capex during the quarter came at $6.4 billion compared to $6.36 billion during the previous quarter.

International expansion

To answer the steadily increasing demand, which is on the rise in the United States as well, TSMC has also increased its manufacturing capacities worldwide. According to the company, it is ready to spend $65 billion in overseas investments over time through three new chip plants it is constructing in Arizona. In addition, the first factory the company opened was in Japan in this year.

In the same week where a key supplier of chip-making machines to TSMC, ASML, sliced its sales forecast lower than expected and sent shares down, TSMC reported its results. While some market participants sound alarm bells over the long-term sustainability of the AI boom, others look toward industry leaders like Foxconn CEO Young Liu, who still see room to grow the AI frenzy.