TSMC second-quarter profit seen jumping 30% on surging AI chip demand

TSMC Earnings: Taiwan Semiconductor Manufacturing, the main producer of advanced chips used in artificial intelligence applications, is expected to report a 30% rise in second-quarter profit on Thursday thanks to soaring demand.

The world's largest contract chipmaker, whose customers include Apple AAPL.O and Nvidia NVDA.O, has benefited from a surge towards AI that has pushed TSMC's stock - and the broader Taiwan market .TWII - to record highs. Last week, its American Depositary Receipts TSM.N topped a trillion dollar market value.

TSMC is set to report a net profit of T$236.1 billion ($7.25 billion) for the quarter ended June 30, according to a LSEG SmartEstimate drawn from 20 analysts. SmartEstimates give greater weighting to forecasts from analysts who are more consistently accurate.

That estimate compares to the 2023 second-quarter net profit of T$181.8 billion.

TSMC last week reported a jump in second-quarter revenue, comfortably beating market expectations.

"I expect the third quarter outlook for all of their products to be very good," said President Capital Management Co Chairman Li Fang-kuo.

TSMC, at its quarterly earnings call at 0600 GMT on Thursday, will update its outlook for the current quarter as well as for the full year, including its capital expenditure as it races to expand production.

TSMC is spending billions building new factories overseas, including $65 billion on three plants in the U.S. state of Arizona, though it says most manufacturing will remain in Taiwan.

On its last earnings call in April, TSMC maintained its guidance for capital spending this year at $28 billion to $32 billion, compared with last year's $30.45 billion, and said 70% to 80% of that would go towards advanced technologies.

"TSMC could raise their capital spending," said KGI Securities Investment Advisory Co Chairman Chu Yen-min. "There are many positive factors which will help their stock price and support the broader market."

The AI boom has helped drive up the price of shares in Asia's most valuable company, with TSMC's Taipei-listed stock leaping 75% so far this year to historic highs, compared with a 33% gain for the broader market.

TSMC, colloquially referred to the "sacred mountain protecting the country" for its critical role in Taiwan's export-dependent economy, faces little competition, though both IntelINTC.O and Samsung005930.KS are trying to challenge that dominance.