Shares of Taiwan Semiconductor Manufacturing Company (NYSE: TSM), also known as TSMC, charged as much as 13.4% higher on Thursday. As of 2:13 p.m. ET, the stock was still up 11.4%.

Driving the semiconductor specialist higher were its quarterly financial results, which came in ahead of expectations.

AI continues to chug along

After the blistering share price rally that kicked off early last year, many stocks in the artificial intelligence (AI) space have been taking a breather as investors take a step back to survey the landscape. Many are looking for clues about the state of the ongoing adoption of AI, and TSMC's results offer some clear indicators.

In the third quarter, TSMC generated revenue of 759.7 billion New Taiwan dollars (roughly $23.5 billion), up 39% year over year (or 36% in U.S. dollars). This resulted in a 54% rise in earnings per share (EPS) to NT$12.54 (or $1.94 per ADR).

Analysts' consensus estimates had called for revenue of $23.1 billion and EPS of $1.80, so TSMC sailed past expectations with room to spare.

CFO Wendell Huang said the results were driven by "strong smartphone and AI-related demand," and a quick look at those segments shows why. Revenues from the company's high-performance computing segment, which includes chips used in AI, surged 51% year over year. The ongoing rebound in smartphone sales was also evident, as revenue from that segment jumped 34%.

Underpinning the AI revolution

TSMC produces about 90% of the world's most advanced, high-end semiconductors, including most of the ones used to power AI applications. Many investors were looking to the semiconductor giant for evidence that demand for AI is still robust -- and the results suggest the answer is a resounding "yes."

Given that, concerns regarding a possible slowdown in AI adoption appear groundless. According to a forecast by Bloomberg Intelligence, the generative AI market is expected to grow at a compound annual rate of 42% over the next eight years to a value of $1.3 trillion by 2032. As the chips TSMC churns out are key hardware for AI, it should continue to thrive.

Furthermore, it's trading at 32 times forward earnings, which is a fair price to pay for a company playing such a pivotal role in the AI revolution. As such, TSMC stock is a buy.

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Danny Vena has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

Why Artificial Intelligence (AI) Chipmaker Taiwan Semiconductor Manufacturing Charged Higher on Thursday was originally published by The Motley Fool