Soaring inflation and a wave of interest rate hikes are putting global economies on the path to recession. And yet, the world’s largest custom chipmaker just raised its full-year revenue forecast after posting another quarter of record profit. It is not crazy to think that Taiwan Semiconductor Manufacturing Co. will achieve these bullish targets.

Second-quarter net profit of NT$237 billion ($8 billion) again beat expectations. Above all, the gross margin of 59.1% is a level not seen for 25 years and well beyond analysts’ forecasts and estimates. It is against this backdrop that the Hsinchu-based company said on Thursday that it expects its revenue to grow by a percentage of 30% this year, just three months after saying it would meet or exceed the initial forecast of 20% medium to high.

Ultimately, this stronger outlook translates to up to $5 billion in additional revenue.

Management is not blind to the global economic turmoil currently unfolding. The US consumer price index hit 9.1%, the biggest rise in 41 years, as central banks from Chile to Canada rush to raise interest rates.

CEO CC Wei explained to investors how rising prices will increase company costs and hurt profit margins, while the general slowdown will force customers to reduce inventory, which will then mean lower orders for TSMC. This impact could last until next year, he said.

Material supply issues will also have an effect. Difficulties in manufacturing and shipping components, exacerbated by lockdowns in China, have made it difficult for companies like ASML Holding NV to provide the sophisticated tools chipmakers need. This will force TSMC to take late shipments on some machines, cutting spending this year to the lower end of its previous $40 billion to $44 billion capital budget. We are also seeing the end of the smartphone boom, an industry that has supported TSMC’s growth for more than a decade.

“Despite ongoing inventory adjustments and uncertainties, structural demand remains firm,” Wei said.

TSMC’s thesis, backed by higher prices for its customers and chip factories running at full capacity, is that the need for ever-more processing power is neither waning nor short-term. While smartphone models come and go on annual (or faster) cycles, companies that need high-performance computing are buying servers and semiconductors that they plan to deploy for many years.

Artificial intelligence is used from e-commerce websites to electric vehicles and requires huge amounts of information as well as computational capacity. Faster 5G communication networks allow more data to flow. These all require more robust chips, and TSMC is one of the few companies that can provide them. And as smartphone shipments decline — down 3.5% last year, according to Bloomberg Intelligence — the number of chips per device increases and those components become more powerful.

Overall, TSMC finds itself in a somewhat immune position to the forces that could see economies decline, unemployment rise and profits decline. Global stock markets have already priced in these changes. But TSMC has the confidence to proceed with a record $40 billion spending plan this year, a move that will help it stay ahead of rivals like Samsung Electronics Co. and Intel Corp.

We shouldn’t take this current strength as proof that the chipmaker is bulletproof. If a recession occurs and is prolonged, enterprise customers buying servers by truckloads will need to re-evaluate their spending plans. Even though high-performance computing demand is a long-term trend, the need for cost control and quarterly profits is a short-term reality for every CEO and that would mean lower orders for TSMC.

Still, as the world’s largest tech provider, the chipmaker can afford to play the long game for quite some time to come. Having a product that everyone will need over the next decade is a great way to weather the immediate challenges of inflation and recessions.

More from Bloomberg Opinion:

• We’re starting to see clear signs of technical issues: Tim Culpan

• Hiring is a bright spot in industrial earnings: Brooke Sutherland

• Semiconductors would not be the only victims of the Taiwan war: Hal Brands

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Tim Culpan is a Bloomberg Opinion columnist covering technology in Asia. Previously, he was a technology reporter for Bloomberg News.

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