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TSMC Fourth-Quarter Profit Expected to Jump 58% Due to AI Chip Demand Surge

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Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s leading producer of advanced chips for artificial intelligence (AI) applications, is set to report a 58% increase in fourth-quarter profit, driven by strong demand in the AI sector. The company, which counts Apple and Nvidia among its clients, is benefiting from the AI megatrend but faces challenges such as U.S. government technology restrictions on China and potential tariffs under President-elect Donald Trump’s administration.

Analysts estimate that TSMC will post a net profit of T$377.95 billion ($11.41 billion) for the quarter ending December 31, compared to T$238.7 billion in the same period the previous year. This projection follows TSMC’s recent revenue report, which exceeded market expectations. The company will release its revenue outlook in U.S. dollars during its quarterly earnings call on Thursday.

Arete Research analyst Brett Simpson believes TSMC’s growth in 2025 will continue to be driven by AI customers. He is optimistic that TSMC can establish a strong relationship with the incoming U.S. administration, especially given its $65 billion investment in three plants in Arizona. TSMC’s overseas expansion, however, is not expected to diminish its Taiwanese manufacturing base.

Fubon Financial’s Edward Chen noted that the company’s progress in Arizona, including chip yield rates, would be critical for its future performance. He also highlighted the uncertainty regarding how tariffs from the Trump administration may impact demand.

TSMC is expected to provide updates on its current quarter and full-year outlook during its earnings call, including capital expenditure plans. The company has already projected capital expenditure for 2024 to be slightly over $30 billion and indicated that 2025’s capital spending could surpass 2024 levels.

The AI boom has driven up TSMC’s stock, with the company’s shares soaring 81% last year, significantly outperforming the broader market’s 28.5% gain.

 

Nvidia Faces Setbacks as Major Customers Delay Orders of Latest AI Racks Due to Overheating Issues

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Nvidia is encountering challenges with its new ‘Blackwell’ AI racks, with major customers delaying their orders due to overheating issues, as reported by The Information on Monday. Shares of the Santa Clara-based company dropped more than 4% following the news.

The overheating problems reportedly affect the initial shipments of the racks, which house Nvidia’s chips in data centers. The glitches include issues with how the chips are connecting to each other. This problem has led major customers such as Microsoft, Amazon’s cloud division, Alphabet’s Google, and Meta Platforms to reduce their orders for the new racks.

Delayed Orders and Shift to Older Models

The affected customers, often referred to as hyperscalers, had placed substantial orders for the Blackwell racks, with each company initially committing $10 billion or more. Some are opting to delay their orders until a later version of the racks is available, while others are returning to older AI chip models.

Microsoft, for instance, had planned to deploy at least 50,000 Blackwell chips in a Phoenix facility, but due to the delays, OpenAI, one of its key partners, requested that Microsoft provide older ‘Hopper’ chips instead.

Despite these delays, it remains unclear how much this will impact Nvidia’s overall sales, as the company may still find other buyers for the affected racks. In November, Nvidia’s CEO Jensen Huang had expressed confidence that the company would exceed its target of generating billions of dollars in revenue from Blackwell chips during its fourth fiscal quarter.

Nvidia and Amazon declined to comment, while Microsoft, Google, and Meta did not immediately respond to Reuters’ inquiries.

 

Nvidia Faces Revenue Threat from New U.S. AI Chip Export Curbs, Analysts Say

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Nvidia, one of the world’s most valuable companies with a market cap exceeding $3 trillion, faces a significant revenue risk due to new U.S. export restrictions on artificial intelligence (AI) chips. The Biden administration’s latest regulations, considered the most stringent so far, aim to limit the global distribution of AI chips while maintaining blocks on exports to China and other restricted nations.

The new rules seek to close regulatory loopholes that have previously allowed advanced chips to reach adversaries, particularly China, where they could potentially enhance military capabilities. However, the restrictions could jeopardize Nvidia’s revenue growth, as nearly 56% of its sales come from international markets, including 17% from China. Nvidia shares fell around 2% following the announcement.

Analysts Warn of Market Contraction

Analysts predict the export restrictions will severely constrain Nvidia’s market opportunities. D.A. Davidson analyst Gil Luria noted that as much as half of Nvidia’s chips currently go to countries that will now be off-limits under the new regulations. This could hinder Nvidia’s ability to sustain its rapid revenue growth, which has been driven by surging global demand for AI chips.

Ned Finkle, Nvidia’s Vice President of Government Affairs, criticized the move, stating it threatens global innovation, economic growth, and America’s leadership in AI. Finkle warned that the rules would impose unnecessary bureaucratic hurdles on U.S. companies, potentially allowing foreign competitors to capture market share.

The Semiconductor Industry Association echoed these concerns, arguing that U.S. firms could lose ground to international rivals in the rapidly expanding AI sector.

Impact on American Firms

The new export curbs have broader implications for U.S. tech firms. Dan Coatsworth, an investment analyst at AJ Bell, remarked that while the rules assert U.S. dominance in advanced technology, they also risk limiting the earnings potential of leading companies like Nvidia.

Nvidia has enjoyed a meteoric rise, with its forward price-to-earnings ratio climbing from 31 to over 80 at its peak in mid-2023. Analysts, however, suggest that these export restrictions could temper its long-term growth trajectory.

Cloud Providers Emerge as Beneficiaries

Major cloud service providers, including Microsoft, Google, and Amazon, stand to benefit from the new rules. Under the regulations, these companies can apply for global authorizations to bypass licensing requirements for AI chips. This allows them to build data centers in countries where chip imports are otherwise restricted, solidifying their dominance as AI market leaders.

CFRA Research analyst Angelo Zino emphasized that these cloud providers have the financial resources and established customer bases to capitalize on the availability of advanced chips, further enhancing their competitive edge.

Regulatory Uncertainty Under Incoming Administration

The rules are set to take effect 120 days after publication, leaving room for potential modifications by the incoming Trump administration. While President-elect Donald Trump has expressed similar concerns about China, analysts believe his administration might negotiate deals with individual companies or revise the list of exempted allies.

Coatsworth suggested Trump might adjust the restrictions to align with his preference for striking bilateral agreements but is unlikely to overturn the broader policy.

As the U.S. tightens its grip on AI chip exports, the impact on Nvidia and the broader tech industry will depend heavily on how these regulations are enforced and whether future administrations amend the rules to mitigate their economic effects.