TSMC to boost capital spending as quarterly profit jumps 35% on AI boom

Taiwan-based TSMC, the world's largest computer chip maker, plans to increase its capital spending by about 40 per cent this year after it reported a 35 per cent jump in its net profit for the latest quarter thanks to the boom in artificial intelligence, the company said Thursday.

Taiwan Semiconductor Manufacturing Corp., a major supplier to companies including Nvidia and Apple, reported a net profit of 506 billion new Taiwan dollars ($16 billion) for the October-December quarter, a 35 per cent surge from a year earlier, better than analysts' estimates.

TSMC said Thursday that its revenue in the last quarter increased 21 per cent from a year earlier to more than 1.046 trillion new Taiwan dollars ($33 billion).

 

TSMC said it plans to boost its capital expenditure budget to $52 billion-$56 billion for 2026, up from about $40 billion last year. The company's shares have climbed more than 8 per cent since the beginning of the year, reflecting its strong position in the AI-driven market.

Other tech giants including Microsoft, Meta and Alphabet are spending big on investments in AI infrastructure.

We expect our business to be supported by continuous strong demand for our leading edge process technologies, Wendell Huang, TSMC's chief financial officer, said in a conference call. He said spending would be significantly higher in the next three years.

The company's Taiwan-listed shares have climbed more than 8 per cent since the beginning of the year, reaching record high levels this month. With a market capitalization -- total outstanding shares times share price -- of about $1.4 trillion, it is Asia's most valuable company.

Alphabet, Google's parent, passed the $4 trillion market capitalization mark this month, the fourth Big Tech company to hit that mark after Nvidia, Apple and Microsoft, although concerns over massive spending on AI could turn into a bubble had led to occasional sell-offs.

TSMC has pledged around $165 billion of investments in the U.S. and has said it's speeding up construction of new plants in Arizona, looking to create a fabrication plant cluster.

A primary beneficiary of AI, given its dominant share in cutting-edge chip manufacturing, TSMC's outlook remains optimistic, analysts from Morningstar said in a recent report.

It is immune from market share shifts as almost every AI company relies on TSMC to make chips ranging from application-specific integrated circuits to GPUs (graphics processing units), the Morningstar analysts said.

TSMC also has strong buffers with deep-pocked customers, they said, even if there are any short term drops in demand.