TSMC’s AI Revenue Surge Ignites Semiconductor Stock Rally

Semiconductor Stocks Surge as TSMC Forecasts Strong AI-Driven Growth

Semiconductor stocks experienced a significant rally on Thursday following Taiwan Semiconductor Manufacturing Co.’s (TSMC) optimistic sales forecast, which anticipates a threefold increase in AI-product revenue this year. The company’s robust performance provided a positive counterbalance to industry concerns that had arisen earlier in the week after a disappointing outlook from another major chipmaker.

TSMC’s strong results led to a broad-based rally in semiconductor stocks, effectively reversing a recent sell-off in the sector. The company’s stock surged up to 13% in New York trading, while other industry giants such as Nvidia, Broadcom, and Micron also saw intraday gains of approximately 4%. The iShares Semiconductor ETF, a key indicator of the sector’s overall performance, increased by as much as 3%.

In its third-quarter earnings report, TSMC raised its 2024 sales-growth forecast to 30%, up from previous projections in the mid-20% range. The company expects AI-product revenue to constitute 15% of its total revenue, highlighting the growing importance of artificial intelligence in the semiconductor industry.

TSMC’s positive results have helped alleviate concerns in the semiconductor industry that had been sparked by ASML’s bleak demand outlook earlier in the week. The Taiwanese chipmaker’s stock has more than doubled year-to-date, trailing only Nvidia’s impressive 182% increase. This performance significantly outpaces the growth of both the iShares Semis ETF and the S&P 500 over the same period.

During the post-earnings conference call, TSMC CEO C.C. Wei emphasized the strong demand for AI products. Wei quoted a key customer describing the current demand as “insane” and indicative of just the beginning of growth in the AI sector.

As the semiconductor industry continues to evolve, TSMC’s forecast suggests that AI-driven demand could be a significant factor in shaping the sector’s future growth and market dynamics.