Taiwan Semiconductor Manufacturing Co. (TSMC) witnessed a positive surge in its stock valuation on Friday, propelled by the strong quarterly earnings announcement from its client, Broadcom. Broadcom, a prominent designer of advanced chips, depends on TSMC for the manufacturing of its designs, particularly those critical for artificial intelligence applications. The robust performance reported by Broadcom underscores the increasing demand for specialized AI processors, a trend that directly benefits TSMC as a leading foundry.
Broadcom's recent third-quarter financial outcomes surpassed market expectations, with revenues reaching $15.95 billion and adjusted earnings per share at $1.69. This impressive growth, a 22% increase year-over-year, was primarily fueled by the burgeoning need for custom AI accelerators, alongside strong sales in networking products and VMware. Broadcom's CEO, Hock Tan, highlighted an extraordinary 63% rise in AI-related revenue, projecting it to reach $6.2 billion in the upcoming fourth quarter and marking eleven consecutive quarters of growth in this segment. Furthermore, Broadcom anticipates fourth-quarter revenue of approximately $17.4 billion, exceeding analyst consensus.
A significant development bolstering TSMC's outlook is Broadcom's recently confirmed $10 billion agreement for custom chips with OpenAI. This strategic partnership, which will see production commence next year and large-scale shipments by 2026, exemplifies a growing industry trend where major technology firms like Alphabet Inc. and Amazon.com Inc. are developing proprietary processors to optimize costs and enhance performance. The deal with OpenAI, aimed at powering its widely used ChatGPT, is expected to substantially increase the demand for TSMC's manufacturing services, further solidifying its market position and contributing to its year-to-date stock gain of over 19%, outperforming the PHLX Semiconductor Index.
The current landscape of the technology sector, characterized by the accelerating pace of AI innovation and application, creates a fertile ground for companies at the forefront of semiconductor manufacturing. TSMC's pivotal role in producing the advanced chips necessary for artificial intelligence development positions it as a cornerstone of future technological advancements. This demonstrates how embracing and contributing to innovation can lead to sustained growth and success, driving progress for society as a whole.