TSMC just posted its December sales on Thursday, reporting NT$278.16 billion (about $84 billion), up 0.8% month-on-month and 57.8% year-on-year.

This translates to the company's Q4 revenue reaching NT$868.5 billion (about $263 billion), another record high, up 39% year-over-year and exceeding the analysts' average estimate of NT$854.7 billion. However, it is within the company's previous guidance of $261 billion to $269 billion.

TSMC will release its full Q4 earnings on January 16th, at which time it will update its outlook for the quarter and the full year.

Since the ChatGPT boom, TSMC's stock price has doubled, and its market cap has surpassed $1 trillion, indicating that AI is driving the semiconductor industry into a new phase of rapid development. As the foundry for tech giants like Nvidia and Apple, TSMC's strong performance reflects the active investments in AI by companies like Alphabet and Microsoft.

Concurrently, other AI-related companies have also reported robust Q4 results. On January 5th, Foxconn, TSMC's parent company, said its revenue for the past three months reached NT$2.13 trillion (about $64.6 billion), up 15% year-over-year, exceeding analysts' expectations of 13%; December's monthly revenue reached NT$654.83 billion, up 42% year-on-year.

Foxconn also expects its Q1 2024 sales to see significant growth, and by 2025, its cloud business (including AI server) revenue will be on par with its iPhone manufacturing business.

However, there are also concerns in the market that issues like over-building and power shortages could become bottlenecks for AI development.

Additionally, the lack of killer AI applications could lead to server capacity underutilization. Besides Nvidia and the AI domain, TSMC also faces uncertainties in the global tech market and geopolitics. Nonetheless, TSMC's gross margin is expected to reach a new high.

Morgan Stanley estimates that TSMC's revenue may decline 5% in the first quarter due to seasonal iPhone impact. However, the company is expected to maintain revenue growth for the full year, though at a rate below 20%. Analyst Charlie Chan said TSMC usually provides conservative guidance.

Analysts believe investors should focus on four key areas in the upcoming earnings call: the impact of CoWoS packaging capacity expansion on future AI chip demand; capacity ramp-up at the Arizona fab to meet the needs of clients like Apple and Nvidia; profitability; and whether TSMC's 2025 capital expenditure plan reflects its confidence in the N2 node.