TSMC Posts Another Record Quarter as $22.7 Billion Profit Eases AI Peak Fears

Second-quarter net income reaches $22.7 billion

Up 77% from a year earlier

Advanced chips below 7 nanometers drive revenue

TSMC says it will build more than four additional fabs in the US

Potential CXMT IPO raises oversupply concerns

Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker, posted another earnings surprise in the second quarter as booming artificial intelligence demand drove record results. A flood of AI chip orders from Nvidia, Apple and Broadcom helped lift the company to its strongest performance yet. Investors viewed the results as easing some concerns that the AI boom may be approaching a peak.

Operating margin reaches 60.3%

TSMC said July 16 that second-quarter revenue totaled NT$1.27 trillion and net income came to NT$706.56 billion, or about $22.7 billion. That exceeded market forecasts of NT$1.264 trillion in revenue and NT$632.64 billion in net income. TSMC shares rose 1.23% to close at NT$2,470, even as Asian chip stocks including Samsung Electronics and SK Hynix fell sharply.

Second-quarter net income surged 77.4% from a year earlier, marking TSMC’s ninth consecutive quarter of double-digit profit growth. Revenue increased 36% from NT$933.79 billion in the same period a year earlier. Operating margin rose 10.7 percentage points to 60.3%, while gross margin was 67.7% and net margin was 55.6%.

Advanced manufacturing led the quarter’s gains. Chips produced on processes of 7 nanometers and below accounted for 77% of revenue. TSMC also recognized revenue from its 2-nanometer process for the first time, with that node contributing 2% of total sales. Its main 3-nanometer process made up 30% of revenue, while 5-nanometer chips accounted for 33%. Smaller nodes generally offer better performance and profitability. By segment, high-performance computing, which includes AI semiconductors, represented the largest share of revenue at 66%.

TSMC also said it would invest $100 billion to build more than four additional fabs in Arizona. That would bring its cumulative US investment to $265 billion.

Capex and revenue growth outlook raised

The company’s strong results helped calm some of the market’s anxiety over a possible AI peak. TSMC raised its full-year capital spending plan to $60 billion to $64 billion from $52 billion to $56 billion. It also lifted its annual revenue growth guidance to 40% from 30%.

Bloomberg News said the sharp increase reflected TSMC’s confidence in global demand for AI infrastructure. ASML Holding NV, the Dutch semiconductor equipment maker, also raised its full-year sales guidance to 43 billion euros to 45 billion euros from 36 billion euros to 40 billion euros in its second-quarter earnings report.

The technology industry broadly expects AI companies to keep spending on infrastructure. The view is that far more investment will be needed to move from agentic AI, which serves as a digital assistant, to an era of “physical AI,” in which more advanced AI is embedded across devices. Ted Pick, Morgan Stanley’s chief executive officer, said during the firm’s second-quarter earnings presentation on July 15 that annual global data-center capital spending is projected to reach $850 billion this year and could climb to $1.5 trillion by 2028.

Many in the industry also expect chipmakers supplying core components for AI data centers to see steeper growth. Even so, some are warning of a semiconductor bubble. Concerns are also mounting over potential overinvestment by memory makers. In particular, a public listing by China’s ChangXin Memory Technologies, or CXMT, could fuel heavy investment and trigger a sharp increase in DRAM supply.

Bae Seong-su, Kang Hae-ryeong and Son Ju-hyeong, Hankyung reporters baebae@hankyung.com