Taiwan SemiconductorTSM

just pulled a Mark Twain by showing that the reports of AI’s death are greatly exaggerated. The world’s most important semiconductor producer posted strong earnings, driven by the sustained boom in AI demand.

A pickaxe trade: A rebound in demand for automotive, smartphone, and industrial chips helped TSMC deliver an unexpectedly strong comeback quarter. However, the firm’s smaller AI-flavored chip business was in focus as “hyperscalers” like OpenAI, MetaMETA

, and GoogleGOOGL

boosted the fortunes of the world’s largest semiconductor manufacturer. This shows that while AI software companies may not yet be generating significant returns from their AI models, their steadfast commitment to AI is currently enriching hardware firms.

• In the third quarter, TSMC’s revenues grew 36% to $23.5B, while profits rose 54% to $10.1B — surpassing their own guidance and Wall Street analysts’ expectations.
• The news sent shares ofTSM
  up more than 11% yesterday, lifting sector peers and the VanEck Semiconductor ETFSMH
  by over 2.6% in sympathy.

It’s AI-l Good

In the coming quarter, TSMC expects AI-related chips to triple their contribution to revenue to 15%. Chair CC Wei attributes this to “real” demand that is “just the beginning and will continue for many years.” Supporting its sector leadership, the business issued a positive outlook for the final quarter of the year.

• The trailblazer in semiconductor research and development expects its revenues to be ~13% higher quarter-over-quarter in Q4, with estimates between $26.1B and $26.9B — maintaining its current growth rate.
• The results contrast with poor earnings from peers such as ASMLASML
  and Samsung, but analysts credit TSMC’s positioning, with Quilter Cheviot’s Ben Barringer saying that the critical partner for AI and cloud computing advancements “continues to go from strength to strength.”

Spending frenzy: Wedbush analysts stated that the results show “no end in sight to AI-derived strength.” This increase in revenue should help offset some of TSMC’s capital expenditures, which it warned investors about despite spending less this year. In 2025, Taiwan’s powerhouse in chip production expects its spending to exceed $30B as it forges ahead on US chip plants. Unlike competitor IntelINTC

, the company has reportedly started making chips at its domestic plants and has achieved the same level of efficiency as it sees back home in Taiwan — a welcome sign for investors.