(Bloomberg) -- 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 isn’t justified by the industry’s business prospects.

TSMC, the main chipmaker to AI leader Nvidia Corp., posted a 16.9% rise in sales for October, the slowest pace since February 2024. Still, that 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 that may have affected TSMC’s reported revenue. Its shares stood largely unchanged in Taipei Tuesday.

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Industry executives remain buoyant about AI-driven growth as major tech firms are accelerating investments in data centers. The TSMC revenue gain covers just a single month of business, offering investors less insight.

What Bloomberg Intelligence Says

TSMC’s seemingly slower 17% year-over-year October sales growth in local currency doesn’t indicate AI chip demand is cooling. The figure is distorted by 1H order pull-ins and a weaker greenback. In US dollar terms, October revenue climbed 22.6% ($12 billion vs. $9.8 billion), aligning with the midpoint of 4Q guidance.

- Charles Shum, analyst

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Still, the market is on edge.

Investors were jolted last week by a sudden slump in Asia’s technology shares, which raised concerns that the world-beating rally in artificial intelligence and semiconductor stocks may be faltering. Wall Street chief executives have warned of an overdue market correction, and Michael Burry’s Scion Asset Management disclosed bearish wagers on Nvidia.

That’s in spite of massive spending plans from leading AI players.

Meta Platforms Inc., Alphabet Inc., Amazon.com Inc. and Microsoft Corp. will collectively spend more than $400 billion to fund an AI buildout next year, a 21% hike from 2025, to secure leadership in the race in emerging technologies.

Chief Executive Officer Jensen Huang of Nvidia, which is the primary AI chip supplier to major companies, said on Saturday his business is “growing month by month, stronger and stronger.”

Huang met TSMC Chief Executive Officer C.C. Wei and asked for more chip supplies during his two-day whirlwind trip to Taiwan. Major chip designers are all trying to extract more production from the Hsinchu-based company, which is constrained by limited capacity.

TSMC is the go-to chipmaker for the Santa Clara, California-based firm’s competitors including Advanced Micro Devices Inc. and Qualcomm Inc., and it makes Apple Inc.’s silicon for iPhones and other gadgets.

Huang’s optimism is shared by his rivals. Qualcomm Chief Executive Officer Cristiano Amon told Bloomberg TV last week that the world is underestimating how big AI will get.

In October, Wei told analysts that TSMC’s capacity was still very tight and the company is working hard to narrow the gap between demand and supplies.

(Updates with share action from the second paragraph. A previous version corrected TSMC’s projected sales.)

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