TSMC Raises Revenue Guidance. What That Says About an AI Bubble.

Taiwan Semiconductor Manufacturing is the dominant manufacturer of advanced processors. (Tomohiro Ohsumi/Bloomberg)

Taiwan Semiconductor Manufacturing continues to benefit from the boom in artificial intelligence and is dismissing fears that investment in the technology is inflating a bubble. The world’s largest chip manufacturer reported a record quarterly net profit and raised its revenue guidance on the back of AI strength.

Taiwan Semiconductor, or TSMC, is crucial to the AI boom as it is the dominant manufacturer of the chips being used to power the technology. Its confidence in multiyear demand for its services was underlined by raised revenue guidance.

TSMCs American depositary receipts were up 2.2% in premarket trading, having risen 54% this year through to Wednesday’s close.

TSMC now expects revenue growth this year in the middle range of 30%-40%. The company previously guided for annual revenue growth of 30% in U.S. dollar terms.

The driver for growth is revenue from AI-related chips, which TSMC has previously said it expects to double in 2025 and grow at a mid-40% annual rate for the next five years. TSMC is the main contract manufacturer for AI chip leader Nvidia . It also makes the core processors inside Apple iPhones, Qualcomm mobile chipsets, and Advanced Micro Devices processors.

While some analysts have raised concerns about circular financing deals such as that struck between ChatGP- developer OpenAI and Nvidia creating the risk of a bubble in AI investment, TSMC shrugged off such worries and said demand was growing exponentially.

“Our conviction in the megatrend is strengthening and we believe the demand for semiconductors will continue to be very fundamental as a key enabler of AI applications,” TSMC CEO C.C. Wei told analysts in an earnings call.

TSMC reported third-quarter net profit of 452.30 billion New Taiwan dollars, or $14.77 billion, up 39% from the same period a year earlier. That was ahead of analysts’ expectations of NT$410.58 billion.

Revenue rose 30% to NT$989.92 billion. In U.S. dollar terms, revenue came to $33.10 billion, up 41%. The company has been facing currency headwinds when reporting in Taiwanese currency due to relative dollar weakness this year.

“Moving into fourth quarter 2025, we expect our business to be supported by continued strong demand for our leading-edge process technologies,” said Wendell Huang, TSMC’s chief financial officer, in a statement.

TSMC said it expects fourth-quarter revenue of between $32.2 billion and $33.4 billion.

Write to Adam Clark at adam.clark@barrons.com