Tech & AI
Taiwan Semiconductor reports record profit on strong AI chip demand
Taiwan Semiconductor posted a record profit on demand for AI chips, yet its shares slid 2.3% on Friday as worries about AI spending weighed on technology stocks.
Quick Read
- Taiwan Semiconductor reported a record profit, with revenue above the top of its own guidance, according to analysts.
- The shares slid 2.3% on Friday as technology stocks fell broadly.
- Needham and DA Davidson reiterated Buy ratings, and Needham raised its price target, the price it expects the stock to reach within a year.
- The company kept its full-year spending plan, which analysts read as confidence in AI demand.
What did Taiwan Semiconductor report?
Taiwan Semiconductor Manufacturing Company (NYSE: TSM) reported a record quarterly profit, driven by demand for chips used in artificial intelligence.
Why it matters: Revenue grew strongly from a year earlier. It also topped the high end of the company's guidance, its own forecast for its results, according to Needham analyst Charles Shi.
High-performance computing, which includes the chips behind AI data centers, now makes up most of the company's sales, DA Davidson analyst Gil Luria said. He added that management's outlook implies faster growth in the final quarter of the year.
Why did the shares fall after strong results?
The shares slid 2.3% on Friday to close at $412.61, down from $422.25. They edged down a further 0.1% in after-hours trading.
The drop came on a weak day for technology. The Nasdaq-100 slid 2.5%, and the technology sector fund fell 3.0%.
The decline may reflect wider worries about how much companies are spending on AI. A strong report did not ease those worries. The stock now sits 15.1% below its 52-week high of $485.80.
What are analysts saying?
The analysts each reiterated a Buy rating. Shi raised his price target, the price he expects the stock to reach within a year. Luria left his target unchanged.
The company kept its full-year plan for capital spending, the money it puts into factories and equipment, Shi noted. He said that points to heavy spending late in the year.
Management cited demand tied to agentic AI, software that can carry out tasks on its own, as a reason for confidence in investing, Luria wrote.
What comes next?
What’s next: The Fed announces its interest-rate decision on Oct. 28 at 2 p.m. ET. The government's initial estimate of economic growth for last quarter follows on Oct. 29 at 8:30 a.m. ET. These reports could shape the mood around technology shares.
For readers
What it could mean for you: People who own a technology or semiconductor fund may feel Taiwan Semiconductor's news more than holders of a broad index fund. Such funds concentrate on one industry, and chipmakers tied to AI often carry large weights in them. Friday showed that a strong report did not shield the group from a broad technology selloff. If worries about AI spending persist, these funds could keep swinging more than the wider market. If the company's spending plans hold up, they might find some support.
Questions and answers
Why did TSM stock fall after record earnings?
The shares slid 2.3% on Friday as technology stocks fell broadly, with the Nasdaq-100 down 2.5%. The drop may reflect wider worries about AI spending that a strong report did not ease.
What drove Taiwan Semiconductor's revenue growth?
Demand for its most advanced chips used in high-performance computing, including AI, drove the growth, according to DA Davidson analyst Gil Luria. He said that business now makes up most of the company's revenue.
What did analysts say about Taiwan Semiconductor stock?
Needham analyst Charles Shi reiterated a Buy rating and raised his price target. DA Davidson analyst Gil Luria reiterated a Buy rating and kept his target unchanged.
The numbers
| Taiwan Semiconductor Manufacturing Company (TSM) price | $412.61 |
|---|---|
| Taiwan Semiconductor Manufacturing Company (TSM) change | −2.28% |
| Taiwan Semiconductor Manufacturing Company (TSM) 52-week high | $485.80 |
| S&P 500 change | −1.09% |
| 10-year Treasury yield | 5.09% |
Friday’s close
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