How the AI Boom Influenced TSMC’s Bottom Line

Ever since the rise of ChatGPT and competitors from big tech companies like Meta, Alphabet or X, generative AI has become the newest golden goose of the industry. Some experts claim this specific AI trend bubble is bound to burst soon or that it is “useless”, as one market analyst said in a recent interview with Fortune. As of now, the financial results of companies like Nvidia, which has strengthened its focus on its data center segment in the past two years, tell a different story. The same goes for Nvidia’s chief business partner, the semiconductor manufacturer TSMC.

The Taiwanese company offers foundry services, meaning they build chips for companies that are unable or unwilling to do so themselves. This business was lucrative before the pandemic, but was accelerated in the post-pandemic AI push. As TSMC annual reports and data from CompaniesMarketCap.com show, TSMC had a market cap of $287 billion at the end of 2019 and generated $11.5 billion of annual income from revenues of $35.7 billion in the same year. Two years later, profits and market cap had doubled, while revenues increased by $22 billion.

While many other tech companies generate higher revenues, TSMC’s profit margin was significantly above the average in the semiconductor industry. According to CSIMarket data, the net margin for semiconductor companies stood at 22.5 percent for the fourth quarter of 2023, while TSMC exhibited a margin of 38.2 percent.

On July 18, TSMC released its full results for the second quarter of 2024, having already generated more revenue and income in six months than it did for the full year five years prior. 52 percent of its second-quarter revenue was generated in the high-performance computing segment, which includes chips for data centers, supercomputers and AI solutions, while 33 percent was from chips for smartphones. The former segment saw a quarter-over-quarter increase of 28 percent, while the latter stagnated compared to the first three months of 2024.

If TSMC’s outlook holds, the company might be well on its way to top its 2022 record highs in revenue and income by the end of 2024. For the third quarter alone, the company published a revenue guidance of $22.4 billion to $23.2 billion. This would push the semiconductor foundry far beyond its results for the year of 2021.