TSMC surpasses $1T market value amid AI boom

Taiwan Semiconductor Manufacturing Co. (TSMC)’s market value surpassed $1T last week, making it the second Asian stock to hit the $1T milestone since PetroChina Co. in 2007. The company’s shares nearly doubled in value from April’s low, and its full-year revenue growth projection increased to 30%.

TSMC posted a Q2 net earnings report of about $13.5B (+60.7% YoY), which the company’s team claimed was driven by an “insatiable” demand for AI chips. The company’s CEO, CC Wei, also attributed the results to strong demand for high-performance computing (HPC) applications. 

The TSMC team expected revenue to grow by another 38% in Q3, although this outlook also implied a drop in revenue in Q4. Wei said the company was becoming more conservative as he pointed to risks posed by U.S. tariff policies.

Wendell Huang, the CFO at TSMC, also said a sequential increase of Taiwan’s currency by 6.6 percentage points could negatively impact the company’s Q3 revenue and lead to a drop of 260 basis points in gross margin. However, customer demand is not expected to change soon. 

TSMC raises U.S. investment plan to $165B

TSMC increased its U.S. investment plans to $165 billion, up from the $65 billion commitment earlier this year. However, the company expects its new capital expenditure (CapEx) to dilute its annual gross margin by 2-4 percentage points for the next five years, starting with profit margins in 2025.

The cautious outlook came after lithography machines supplier ASML said President Trump’s tariffs had a less negative impact than expected. 

Huang said the company aimed to stay cautious with spending this year, with plans to spend up to $42 billion in CapEx in 2025. However, the company will also closely watch macros and forex risks, especially with margin-threatening currency swings. TSMC continues to review its hedging strategies to mitigate currency volatility, which Huang says comes with many uncertainties. 

TSMC expects revenue of between $31.8 and $33 billion in Q3, with gross margins of 55.5%-57.5%. The company posted Q2 revenue of $30.07 billion (+44%), surpassing forecasts and driven mainly by 7nm and below chips.

Needham analyst Charles Shi projected the chipmaker would have a Q3 revenue of $32.4 billion, up from the previously predicted $29.3 billion. He also projected EPADS of $2.65, an increase from the previously forecasted $2.40.

TSMC aims for a ‘gigafab cluster’ in Arizona

TSMC announced plans to fast-track its Arizona project to begin production at its second Arizona plant by 2027. Huang said the company expected roughly 30% of its 2nm chips to eventually come from Arizona as it looked to potentially add a third Arizona plant. 

Wei said last week that the company aimed to create a “gigafab cluster” in Arizona to support its U.S. clients in the smartphones and AI sectors. He mentioned that the company would pull forward its production timelines by “several quarters,” adding that its first Arizona fab’s yield rates were comparable to those of its Taiwanese fabs. The CEO said his company endeavored to “narrow the gap” between capacity and demand.

However, the company’s executives expressed concern over specific impacts of U.S. tariffs, saying that how they would affect TSMC’s broader future business was still unclear. The executives pointed out that TSMC faced several challenges, including a “complex global trade environment,” as it looked to expand into humanoid robots. Wei claimed the humanoid robot sector could grow up to 10x larger than that for EVs (electric vehicles). 

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