Nvidia and Apple supplier TSMC shares pop 10% after quarterly profit soars on AI demand

Shares of Taiwan Semiconductor Manufacturing Co., the world's largest producer of advanced chips, serving clients such as Apple and Nvidia, jumped more than 10% on Thursday morning after the company reported a 54% hike in net profit in the third quarter. The company expects annual revenue growth in the last three months of the year, as global chipmakers continue to benefit from demand boosted by artificial intelligence applications.

Shares of chip companies rose on the results. Nvidia stock was up about 3% to a new all-time high, Micron rose about 4% and AMD was up about 2% on Thursday morning.

The company's net income was 325.3 billion New Taiwan dollars ($10.1 billion) over the July-September quarter, surpassing an LSEG estimate of NT$300.2 billion cited by Reuters.

Net revenue came in at $23.5 billion in the third quarter, up 36% year on year, with TSMC's gross margin rising to 57.8% over July-September, compared with 54.3% in the same period of last year.

"Based on the current business outlook, we expect for our fourth-quarter revenue to be between $26.1 billion and $26.9 billion, which represents a 13% sequential increase or a 35% year-over-year increase at the midpoint," TSMC Chief Financial Officer Wendell Huang said during an earnings call following the results release, according to a call transcript produced by FactSet.

In the third quarter, "our business was supported by strong smartphone and AI-related demand for our industry leading 3nm and 5nm technologies," TSMC said in a statement, referencing its semiconductor nodes.

In the Thursday earnings call, TSMC Chairman and CEO C.C. Wei stressed that AI demand is "real" and that the company has experienced the "deepest and widest growth of anyone in this industry," as a result.

"We have talked to our customers all the time, including our hyperscaler customers who are building their own chips. And almost every AI innovator is working with TSMC," he said.

The company's Taipei-listed shares have soared nearly 80% year to date, outpacing the 28.57% gains of the broader market over the same period.

TSMC now anticipates its capital expenditure for this year will pick up to slightly higher than $30 billion, it said during its earnings call. The firm's capex costs edged higher to $6.4 billion in the third quarter, versus $6.36 billion across the three preceding months.

The Taiwanese chipmaker, whose advanced chips are vital to a swathe of products ranging from smartphones to AI applications, has been increasing its manufacturing presence worldwide, carrying out a vast overseas investment of $65 billion for three chip plants in Arizona to meet U.S. demand, as well as opening its first factory in Japan earlier this year.

TSMC's earnings beat comes the same week as Netherlands-based ASML, which supplies machines to the Taiwanese company, issued a lower-than-expected forecast for net sales, sending shares tumbling.

Some market participants have questioned the long-term resilience of the artificial intelligence boom and the return on increasing investments in the technology sector — while Young Liu, CEO and chairman of key Apple supplier Foxconn, told CNBC last week that the AI frenzy "still has some time to go," as advanced language models evolve with each new iteration.

Correction: This article has been updated to accurately reflect that TSMC's third-quarter net income hit 325.3 billion New Taiwan dollars.