By Wen-Yee Lee and Faith Hung
TAIPEI (Reuters) - Taiwan Semiconductor Manufacturing Co, the main global producer of advanced chips used in artificial intelligence applications, is expected to report a 58% leap in fourth-quarter profit on Thursday because of surging demand.
The world's largest contract chipmaker, whose customers include Apple (NASDAQ:AAPL) and Nvidia, has benefited from the megatrend towards AI. But the Taiwanese company faces headwinds from U.S. government technology restrictions on China and uncertainty about President-elect Donald Trump's incoming administration, which has threatened broad import tariffs.
TSMC is set to report a net profit of T$377.95 billion ($11.41 billion) for the quarter ended Dec. 31, according to a LSEG SmartEstimate drawn from 22 analysts. SmartEstimates give greater weighting to forecasts from analysts who are more consistently accurate.
That estimate compares to the 2023 fourth-quarter net profit of T$238.7 billion.
TSMC last week reported a jump in fourth-quarter revenue in Taiwan dollars, comfortably beating market expectations. The company gives its revenue outlook in U.S. dollars on its quarterly earnings call, scheduled for 0600 GMT on Thursday.
Brett Simpson, Arete Research co-founder and senior analyst, said 2025 will be another year where TSMC's growth is largely driven by AI customers.
"From the U.S. government perspective, Arete is optimistic that TSMC can build a good relationship with the new administration particularly given its new fab cluster in Arizona is the biggest foreign direct investment project in the U.S. at present," he added.
TSMC is spending billions of dollars on new factories overseas, including $65 billion on three plants in the U.S. state of Arizona, though it says most manufacturing will remain in Taiwan.
Edward Chen, chairman of Fubon Financial's securities investment unit, said progress on the Arizona fab and its yield rates, or the percentage of usable chips, would be crucial for the company.
"Additionally, the impact of tariffs to be imposed by the incoming Trump administration on demand remains to be seen," he added.
TSMC, at its earnings call, will update its outlook for the current quarter as well as for the full year, including planned capital expenditure as it races to expand production.
On its last earnings call in October, TSMC said capital expenditure was likely to be higher in 2025 than last year, though it did not provide a figure.
On the call, it predicted 2024 capital expenditure as being slightly higher than $30 billion.
The AI boom has helped drive up the price of shares in Asia's most valuable company, with TSMC's Taipei-listed stock soaring 81% last year, compared with a 28.5% gain for the broader market.
($1 = 33.1280 Taiwan dollars)