Taiwan Semiconductor Manufacturing Co. (TSMC), a leading chipmaker for Apple and Nvidia, recently projected quarterly sales and capital expenditure surpassing analyst estimates. This positive outlook signals continued resilience in AI hardware spending throughout 2025.
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TSMC anticipates spending between $38 billion and $42 billion on technology and capacity this year, exceeding analyst predictions by up to 19%. The company also forecasted revenue between $25 billion and $25.8 billion for the March quarter, potentially exceeding projections by as much as 6%. Following this announcement, TSMC shares experienced their most significant surge since October, contributing to a rally among US and European chip equipment manufacturers like Applied Materials Inc. and ASML Holding NV.
AI Spending Fuels Optimism Amidst Market Uncertainties
TSMC’s robust performance bolsters confidence in the ongoing AI spending cycle that has propelled companies like Nvidia to record heights. The emergence of ChatGPT ignited a rapid expansion of data centers over the past two years, benefiting numerous companies contributing to the AI boom’s infrastructure and processing power.
However, the current lack of a highly profitable AI application raises concerns about a potential bubble. Furthermore, TSMC, like many in the industry, faces uncertainties arising from the US-China tech conflict, which threatens supply chain disruptions and global chip flow. Recent US export control rules on AI chips aimed at limiting supply to China exemplify these challenges.
Smartphone Dependence and Diversification Efforts
Beyond AI, TSMC remains significantly reliant on consumer electronics and smartphones, with Apple as its largest customer. While iPhone sales have been subdued, industry expectations anticipate growth in mobile AI features, potentially driving broader market expansion.
TSMC CEO C.C. Wei acknowledged that smartphone unit growth will likely remain in the low single digits in 2025. However, he also indicated a mild recovery in sectors outside of AI. Following the earnings announcement, TSMC’s depositary receipts in New York saw a significant intraday gain, reflecting investor confidence.
Capital Expenditure and Global Expansion Plans
TSMC’s capital expenditure (capex) provides insights into chip and electronics demand and the pace of its international expansion. The 2025 projection indicates a potential spending increase of up to 40% compared to 2024. Geopolitical tensions are driving TSMC’s overseas manufacturing efforts, with plans for additional plants in Europe, particularly focusing on the AI chip market, in addition to a facility under construction in Dresden, Germany.
Company executives confirmed that the Arizona plant, a key component of the Biden administration’s policy, will incorporate cutting-edge technology in the future, although a specific timeline remains undefined. They emphasized that the most advanced semiconductors will continue to be produced domestically.
Positive Outlook for 2025 Despite Challenges
For 2025, TSMC projects growth in the mid-20% range, aligning with analyst estimates. Despite volatility in the smartphone market, executives underscored that AI spending will remain a primary growth driver. This positive outlook suggests that TSMC is well-positioned to capitalize on the expanding AI market while navigating geopolitical challenges and diversifying its manufacturing footprint. Analysts suggest that despite US restrictions, TSMC may be able to retain a significant portion of its existing orders from China, particularly for smartphone and mid-range computing chips.
