Chip manufacturing giant TSMC (TSM, Financial) reported better-than-expected sales for the fourth quarter of 2024, boosting investor confidence that the demand for AI hardware will continue into 2025. The company's revenue from October to December increased by 39% to 868.5 billion New Taiwan dollars ($26.3 billion), surpassing the average forecast of 854.7 billion New Taiwan dollars.
TSMC's strong performance has bolstered expectations that major tech companies like Alphabet and Microsoft will continue to rapidly build and upgrade data centers to support AI development. Recently, AI server manufacturer Hon Hai Precision Industry Co. reported better-than-expected sales, while Microsoft outlined plans to invest $80 billion in data centers this fiscal year.
TSMC's revenue growth accelerated in December, setting a 2024 revenue growth cap at 34%, compared to the company's official target of 30% growth, calculated in US dollars. Despite TSMC's market value nearly doubling in 2024 to approximately $1.1 trillion in the US, some investors are concerned about when the AI boom might wane.
Market observers warn of potential overbuilding, power shortages, and a lack of breakthrough AI applications, which could exhaust server capacity. Investors are eager to learn about TSMC's industry outlook in its full earnings report on January 16.
Beyond AI, TSMC faces increasing technological and geopolitical uncertainties in 2025. The company remains reliant on Apple, a major client for iPhone chips. Analysts expect TSMC's gross margin to rise to its highest in two years, around 58% or more, with key areas to watch in the upcoming earnings call.
TSMC is pursuing rapid international expansion, planning to increase capital expenditures to about $30 billion by 2025, with new facilities in Europe, Japan, Arizona, and Germany.
