TSMC Q4 profit poised to soar 27% as AI demand drives growth

TSMC's Financial Outlook and AI Market Impact

By Wen-Yee Lee

Revenue Growth Drivers

TAIPEI, Jan 12 (Reuters) - TSMC, the world's largest manufacturer of advanced artificial intelligence chips, is expected to post a 27% jump in fourth-quarter net profit to a record due to the seemingly insatiable demand for AI infrastructure.

Market Share and Competitors

Taiwan Semiconductor Manufacturing Co, the world's top contract chipmaker and a key supplier to Nvidia and Apple, is forecast to report a net profit of T$475.2 billion ($15.02 billion) for the three months through December 31, according to an LSEG SmartEstimate compiled from 19 analysts.

Investment in U.S. Chip Factories

SmartEstimates place greater weight on forecasts from analysts who are more consistently accurate.

Potential Risks from Tariffs

TSMC, Asia's most valuable listed company with a market capitalisation of around $1.38 trillion - more than twice that of South Korean rival Samsung Electronics - is due to report on Thursday and will provide first-quarter and full-year guidance in an earnings call scheduled for 0600 GMT.

It last week posted a market-forecast-beating rise in fourth-quarter revenue of 20.45%. Any profit result above T$452.3 billion would mark the company's highest-ever quarterly net income and its eighth consecutive quarter of profit growth.

Fourth-quarter revenue was driven by full utilisation of TSMC’s 3-nanometre capacity, fuelled by the iPhone 17 series using Apple’s A19 chip, as well as sustained robust demand for AI, said Galen Zeng, senior research manager at research firm IDC.

Looking ahead, Zeng said IDC expects TSMC’s revenue to grow 25%–30% in 2026 in U.S. dollar terms, up from its previous forecast of 22%–26%, citing booming demand for AI server accelerators and significant contributions from the company’s next-generation 2-nanometre node.

"The main driver is the explosive growth of the AI server accelerator manufacturing market," Zeng said, adding that the market is projected to grow 78% year-over-year in 2026.

Shay Boloor, chief market strategist at Futurum Equities, said AI demand is clearly accelerating and TSMC continues to gain share at the leading edge, where competitors are struggling to keep pace. 

But a faster-than-expected ramp-up of overseas fabs could dilute margin gains expected from TSMC's 2-nanometre node and pricing, he added.

TSMC is investing $165 billion to build chip factories in the U.S. in the state of Arizona, and U.S. Secretary of Commerce Howard Lutnick said in a podcast released last week the company was set to invest more into the country.

TSMC, which is currently in its pre-earnings quiet period, did not reply to a Reuters request for comment.

It remains unclear how much U.S. President Donald Trump's tariffs will affect TSMC. Taiwan's exports to the United States are subject to a 20% tariff, but that excludes chips.

TSMC's Taipei-listed shares gained 44.2% last year, outperforming the 25.7% rise for the broader market.    

($1 = 31.6410 Taiwan dollars)

(Reporting by Wen-Yee Lee; Editing by Ben Blanchard and Muralikumar Anantharaman)