TSMC's third-quarter profits are expected to rise 40% thanks to strong demand for its artificial intelligence chips

TAIPEI (Reuters) – Taiwan Semiconductor Manufacturing (TSM, 2330.TW), a major producer of advanced chips used in artificial intelligence applications, is expected to report a 40% jump in third-quarter profit on Thursday thanks to rising demand.

The world's largest contract chip maker, whose clients include Apple (AAPL) and Nvidia (NVDA), has benefited from the trend toward artificial intelligence.

TSMC is set to report net profit of NT$298.2 billion (US$9.27 billion) for the quarter ended September 30, according to LSEG SmartEstimate drawn from 22 analysts. SmartEstimates gives more weight to forecasts from consistently more accurate analysts.

This estimate compares to third-quarter 2023 net profit of NT$211 billion.

TSMC last week reported a jump in third-quarter revenue as expressed in Taiwanese dollars, comfortably beating market expectations. The company presents its revenue forecast in US dollars in its earnings conference call.

“Most of TSMC's major customers, including Apple, Nvidia, AMD (AMD), Qualcomm (QCOM) and Mediatek (2454.TW), are launching new products that rely heavily on TSMC's advanced processing technologies,” said Li Fang Kuo, chairman of TSMC. Head of Capital Management.

“TSMC's third-quarter earnings will far exceed expectations,” Lee added.

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

TSMC is spending billions to build new factories abroad, including $65 billion to build three factories in the US state of Arizona, although it says most of the manufacturing will remain in Taiwan.

In its last earnings call in July, TSMC raised its full-year revenue forecast and revised its capital spending plans for the year to between $30 billion and $32 billion, compared to the previous forecast of $28 billion to $32 billion.

The AI ​​boom has helped lift share prices in Asia's most valuable company, with Taipei-listed TSMC shares up 77% so far this year, compared with a 28% gain for the broader market.

TSMC, headquartered in Hsinchu and colloquially referred to as the “sacred mountain that protects the country” for its crucial role in Taiwan's export-oriented economy, faces little competition.

Once the dominant force in the semiconductor industry, five-decade-old Intel ( INTC ) is facing one of its worst stretches as losses mount at the contract manufacturing unit it is building in hopes of challenging TSMC.

(Reporting by Ben Blanchard and Faith Hong; Editing by Christopher Cushing)