The main chipmaker for Nvidia Corp. now expects capital expenditure of $60 billion to $64 billion in 2026, up from $52 billion to $56 billion previously. It’s also projecting revenue growth of slightly above 40% in US dollar terms, significantly higher than the more than 30% it had predicted. Shares in key supplier ASML Holding NV rose more than 3% in Europe.
TSMC affirmed Thursday it will likely ramp up spending even further over the course of the next three years. That accelerating pace of expansion reflects expectations that big tech firms from Meta Platforms Inc. to Alphabet Inc. will continue to gobble up the chips and hardware they need to build data centres.
The four biggest American AI operators — known as hyperscalers — are expected to spend upwards of $725 billion this year alone. That buildout has helped propel tech stocks to record levels this year, including TSMC — a bellwether for the fast-growing sphere because it produces the vast majority of the world’s most advanced chips.
Investors are now grappling with lofty stock valuations, even as they debate whether Meta and its rivals are building more computing capacity than they will need in future. Shares in Tokyo Electron Ltd., another of TSMC’s biggest suppliers, recouped much of their losses but closed down more than 4%.
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“Our conviction in the AI megatrend is very strong,” Chief Financial Officer Wendell Huang told analysts on a post-earnings call. “The capex in the next three years will be even more, significantly higher than in the past three years.”
TSMC’s confidence echoes similar views from many of the firms that underpin a historic AI rollout. SK Hynix Inc. now sees memory chip shortages persisting beyond 2030, as the spending spree by data centre operators stokes appetite for both conventional memory and the high-bandwidth or HBM chips that work with AI systems.
TSMC, which also makes chips for Apple Inc. iPhones, reported a faster-than-anticipated 77.4% rise in quarterly net income. Some of its increased spending is likely to go towards Arizona, where the Taiwanese company has now budgeted a total $265 billion for capacity expansion. TSMC on Thursday formalised a pledge that’s part of a larger deal between Washington and Taipei to bring more advanced semiconductor manufacturing to American soil.
A bigger Arizona facility should go a long way toward serving its core American client base. Chief Executive Officer C.C. Wei warned in June that his company won’t be able to fulfil demand led by US customers for years, even as more manufacturing capacity comes online in that country.
Still, concerns from investors persist as the biggest data centre operators continue to borrow and raise capital to bankroll their construction. A significant proportion of their AI spending is now backed by ballooning borrowing. While AI adoption is soaring around the world, companies and investors still struggle with uncertainty around profit-making and ways to generate lucrative returns from all that outsized investment.
The durability of the AI rally remains in focus as the earnings season tests chip-sector valuations after a blistering advance this year. Semiconductor stocks fell across Asia on Thursday, dragging regional equities lower, as investors grew more sceptical that the artificial intelligence-driven rally can withstand lofty valuations.
