TSMC Defies Costs with Strong Margins and Eyes AI-Driven Growth

TSMC's recent financial performance has exceeded expectations, according to Huaxing Securities analyst Colin Liu. The company's third-quarter gross margin demonstrated resilience against rising production costs of 3nm chips, an improvement Liu suggests will persist through the first half of 2025.

Liu forecasts that an anticipated price increase in early 2025, combined with steady high utilization rates, will serve as primary drivers of revenue growth next year. This optimism is reflected in the upward revision of TSMC's revenue forecasts for 2024-2025 by 2% to 10%, underscoring the firm's confidence in the burgeoning demand for AI and leading-edge chip technologies.

Despite the near-term positivity, Liu notes potential future challenges with the expected ramp-up in 2nm chip production by 2026, which may exert pressure on TSMC’s profit margins.