By Zaheer Kachwala and Deborah Mary Sophia
April 16 (Reuters) – Strong forecasts from ASML and TSMC this week point to another quarter of hefty spending by American cloud-computing giants as they race to secure advanced chips needed for their artificial intelligence build-outs.
The results suggest that demand stayed strong for AI chip designers such as Nvidia, Advanced Micro Devices and Broadcom, all of which rely on TSMC, the world’s dominant producer of cutting-edge processors.
“AI (demand) is so strong … Our customers, and customers of customers – who are mainly the cloud service providers – continue to provide us with their very strong signal and positive outlook,” TSMC CEO C.C. Wei said on an analyst call.
The company raised its annual revenue forecast on Thursday and said it was stepping up capital spending this year to meet AI chip demand.
ASML, the world’s largest supplier of chip-making tools, also lifted its annual revenue forecast on Wednesday.
“ASML’s positive numbers generally paint a favorable picture for the semiconductor industry, even amid AI bubble concerns,” said Giuseppe Sette, co-founder and president of investment analysis platform Reflexivity.
Growing investor pressure on technology majors such as Microsoft, Meta and Amazon to deliver clearer returns on their AI investments has raised doubts about how long the chip spending boom can continue. Still, the companies are expected to spend over $600 billion this year on data centers.
Alphabet, Meta, Microsoft, and Amazon will report quarterly earnings on April 29.
While overall AI chip appetite remains strong, demand is increasingly moving towards advanced processors required to make large language models operate or apply their training to answer questions, also known as inference.
CAPACITY CONSTRAINTS LIMIT GROWTH POTENTIAL
With demand for AI chips and equipment skyrocketing, the industry’s heavy reliance on a handful of suppliers means chipmakers can only meet orders if they secure sufficient manufacturing capacity at those firms.
As a result, companies have taken to signing long-term agreements to secure capacity commitments for multiple years.
ASML CEO Christophe Fouquet said demand is set to outstrip supply for the foreseeable future, creating constraints across markets ranging from AI to smartphones and personal computers.
TSMC executives on Thursday also pointed to tight production capacity, with the company working aggressively to expand manufacturing capabilities in order to produce AI chips in mass quantities.
“Capacity is very tight, but we are working hard to make sure that we can meet customers’ demand … we are stepping up our capex investment to increase our capacity,” Wei said.
(Reporting by Zaheer Kachwala and Deborah Sophia in Bengaluru; Editing by Devika Syamnath)
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