Taiwan Semiconductor Manufacturing Company Limited (TSMC) saw its revenue grow by 33 percent last month, which is a pretty strong performance. It's a good sign for the smartphone market and for NVIDIA Corp.'s artificial intelligence chips.

TSMC's August sales reached NT$250.9 billion (US$7.8 billion), according to the latest data. This is down from 45 percent growth the previous month, but the market is still feeling optimistic about TSMC's future. Analysts are expecting TSMC's third-quarter revenue to grow 37 percent, which would continue its strong recovery from the trough of the 2023 epidemic.

These monthly figures have temporarily put market concerns about AI infrastructure spending to rest. On September 3, NVIDIA reported results that fell short of the market's highest expectations, causing its market capitalization to drop by about $279 billion in a single day, the largest one-day drop in its history.

Bernstein analyst Mark Li and others think TSMC's third-quarter revenue might be a little higher than expected. If September's results are in line with what we've seen over the past eight years, TSMC's third-quarter revenue could be 5% to 6% higher than expected.

TSMC's high-performance computing business, especially in areas related to AI, has become a major source of more than half of the company's revenue. TSMC, a major chipmaker for NVIDIA, is also a core supplier of Apple's iPhone main processor. Apple's recently released iPhone 16 series of phones are sold on their AI capabilities and are expected to be further enhanced with subsequent software updates.

Bloomberg analysts think the launch of the iPhone 16 and 16 Pro, along with the adoption of Wi-Fi 7 technology, is going to drive demand for TSMC's N6 and N4 processes, especially since Wi-Fi 7 chips are used by customers like Broadcom and MediaTek. Plus, performance improvements in the A18 and A18 Pro processors have made people even more optimistic about TSMC's N3E node.

TSMC upped its full-year revenue growth forecast to more than 20 percent in July and is looking at third quarter revenue of between $22.4 billion and $23.2 billion, up 9.5 percent sequentially and 32 percent year-over-year.

TSMC's revenue got a boost from Intel's upcoming Lunar Lake processor, as the market recovers and major customers like Apple and NVIDIA stick with them in the long term. While iPhone shipments may have declined slightly in the fourth quarter, new product launches from customers like MediaTek, Qualcomm, Intel, and NVIDIA are good for TSMC's revenue outlook.

Looking ahead to 2024, TSMC expects its dollar revenue to grow between 24% and 26%. The company will keep focusing on advanced process technologies and expand capacity utilization at 3nm and 5nm in anticipation of a great year in 2024, according to chairman and CEO Chieh-Chia Wei.

On top of that, TSMC is in the middle of a big global expansion. This includes a project in Arizona, a third plant in Japan, and a new €10 billion facility that's being built in Germany.