By Sherry Qin


Taiwan Semiconductor Manufacturing Co. reported a 36% rise in second-quarter profit as it continued to witness surging demand for its advanced chips, with enthusiasm over artificial intelligence sending the chip maker's shares to record highs recently.

The world's largest contract chip maker said Thursday that net profit rose 36% from a year earlier to 247.85 billion New Taiwan dollars (US$7.61 billion) for the three months ended June. That exceeded the NT$235.12 billion consensus estimate from a FactSet poll of analysts.

Second-quarter revenue rose 40% to NT$673.51 billion after its June revenue climbed 33%.

TSMC's operating profit margin was 42.5% for the quarter, up 0.5 percentage points from a year earlier.

TSMC said revenue from its high-performance computing segment, which includes AI chips, rose about 28% from the previous quarter, while revenue from smartphones fell 1% and revenue from its Internet-of-Things segment rose 6%.

The Taiwanese company, which counts Nvidia and Apple as clients, produces roughly 90% of the world's most advanced chips.

Investors have pushed shares of the chip maker to all-time highs, driven by bets the AI frenzy is poised to continue. Its Taiwan-listed shares have risen nearly 70% this year, outperforming the benchmark Taiex's 30% gain. Last week, its American depositary receipts rose to a record, briefly pushing the company's market value past US$1 trillion.

The company guided for third-quarter revenue of US$22.4 billion to US$23.2 billion, with its operating profit margin expected between 42.5% and 44.5%.

However, geopolitical concerns remain an overhang for TSMC and the broader semiconductor industry.

TSMC's stocks came under pressure ahead of the earnings report and overnight on Wall Street following remarks by U.S. presidential candidate Donald Trump. He took aim at Taiwan's chip-production dominance, saying the island should pay the U.S. for defense in an interview with Bloomberg Businessweek.

The simmering threat of a Chinese invasion and the emergence of chip manufacturing as a geopolitical priority have pushed it to become more geographically spread out.

TSMC is spending billions on building new factories overseas, including three plants in Arizona for more than US$65 billion.

A report that the Biden administration is considering new restrictions on chip companies doing business in China helped fuel pessimism.

Shares of the company dropped another 2.4% in Taiwan trading Thursday after its ADRs in New York slumped 8.0%, their biggest one-day percentage drop in four years.


Write to Sherry Qin at sherry.qin@wsj.com


(END) Dow Jones Newswires

07-18-24 0306ET