TSMC's Slowing Sales Raise Questions on AI Industry's Sustainability

Taiwan Semiconductor Manufacturing Co. posted its slowest monthly revenue growth in more than a year, lending credence to concerns that the artificial intelligence stock rally is not justified by the industry's business prospects. The company's sales for October rose by 16.9%, the slowest pace since February 2024, according to a statement released by TSMC. This growth rate tracks with the average analyst estimate for a 16% sales increase in the current quarter. The company has also been grappling with a strengthening local currency, which may have affected TSMC's reported revenue. Its shares stood largely unchanged in Taipei on Tuesday. Matthew Bloxham, a senior analyst at Bloomberg Intelligence, attributed the slowdown in TSMC's sales growth to the AI industry's current state. "The AI stock rally has been driven by hype and speculation, rather than fundamental business prospects," Bloxham said in an interview. "TSMC's sales growth is a reflection of the industry's underlying trends, and it's clear that the AI boom is not as sustainable as some investors have made it out to be." Bloxham's comments echo concerns raised by industry experts and analysts, who have warned that the AI stock rally is unsustainable and may lead to a market correction. TSMC's sales growth is closely tied to the demand for high-performance computing chips, which are used in AI applications. The company has been a key supplier to AI leader Nvidia Corp., which has seen its stock price surge in recent months. However, the AI industry's growth prospects have been called into question by some analysts, who point to concerns about energy consumption, data security, and the environmental impact of AI systems. The slowdown in TSMC's sales growth has significant implications for the AI industry and the broader technology sector. If the AI stock rally is not justified by fundamental business prospects, it could lead to a market correction and a decline in stock prices. This could have far-reaching consequences for investors, companies, and the broader economy. As the AI industry continues to evolve and mature, it is essential to separate hype from reality and to focus on the underlying business prospects of the industry. TSMC's shares have been trading largely unchanged in Taipei, but the company's sales growth slowdown has sent a clear signal to investors and analysts that the AI industry's growth prospects are not as rosy as they seem. As the industry continues to navigate the challenges and uncertainties of the AI boom, it is essential to remain cautious and to focus on the underlying fundamentals of the industry.