Taiwan Semiconductor Manufacturing Co. (NYSE:TSM) just delivered a blowout third-quarter performance, sending its stock up 8% in premarket trading. With revenue up 36% year-over-year to $23.5 billion and a 54% jump in net profit, Taiwan Semiconductor is riding the wave of skyrocketing demand for AI chips. High-performance computing, driven by AI, now makes up 51% of their revenue, reinforcing Taiwan Semiconductor's role as the backbone for giants like Nvidia, AMD, and Apple. If you're looking for a bellwether in the AI race, Taiwan Semiconductor is the one to watch.

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CEO C.C. Wei didn't hold back on the earnings call, highlighting the extremely robust AI-related demand from customers and forecasting that AI chips will account for a mid-teens percentage of revenue this year. Fourth-quarter guidance is equally bullish, with projected revenues between $26.1 billion and $26.9 billion, setting the company up for nearly 30% growth in 2024. Even with rising costs from advanced technology nodes like 3nm, Taiwan Semiconductor smashed expectations with a gross margin of 57.8%, proving they can handle the heat while continuing to dominate the semiconductor landscape.

Looking ahead, Taiwan Semiconductor plans to exceed $30 billion in capital expenditures for 2024, ready to meet the relentless demand for AI chips. Expansion in the U.S. is also on the horizon, with its first Arizona fab scheduled for production in 2025. As AI reshapes the semiconductor industry, the company is cementing its leadership, giving investors plenty of reasons to stay bullish. The message is clear: Taiwan Semiconductor isn't just keeping pacethey're setting it.

This article first appeared on GuruFocus.