TSMC reported sales surge exceeding expectations driven by AI infrastructure chip demand.

Taiwan Semiconductor Manufacturing Company achieved its strongest second-quarter sales growth since 2022, driven by the global AI boom that is fueling data center investment worldwide. The sole supplier of Nvidia and Apple's most advanced chips reported June revenue of NT$207.9 billion ($6.4 billion), representing 40% growth in the June quarter to NT$673.5 billion, compared to the average projection for a 35.5% rise. This performance comes after TSMC briefly reached a $1 trillion market capitalization as investors poured capital into artificial intelligence-related data centers and devices.

The surge in demand stems from businesses worldwide racing to procure hardware such as Nvidia chips to build AI-supporting infrastructure. This robust demand from AI-related orders has successfully offset lackluster smartphone sales, which are only beginning to emerge from a prolonged downturn. Apple remains Hsinchu-based TSMC's biggest customer, continuing to anchor the company's revenue base.

TSMC's strong performance has prompted Wall Street brokerages to lift their price targets for the chipmaker, citing its potential to charge customers more in 2025 to further elevate earnings. TSMC and other AI-related stocks in Taiwan have helped lift the benchmark Taiex Index by more than 40% over the past 12 months, despite overarching concerns about US-China geopolitical tensions around the island.

However, valuation concerns are tempering broader optimism in the AI sector. A New Street Research analyst downgraded Nvidia earlier this week, saying it is "getting fully valued." Nvidia shares have soared 165% this year, on top of a gain of almost 240% in 2023, raising questions about sustainability at current price levels.