Nvidia AI Partnership and Price Hike Expectations Provide Dual Boosts, Why Did TSMC Still Pull Back After Hitting Highs?

TradingKey - During the June 1 Asian trading session, TSMC (2330.TW) rose by as much as 2.7% to NT$2,415, hitting a record high and bringing its market capitalization above NT$62 trillion. However, it eventually closed at NT$2,355, with its gains narrowing to flat, erasing all the day's advances.

[Source: TradingView]

The early morning surge was driven by two factors: first, TSMC and Nvidia ( NVDA) announced an expansion of their strategic cooperation to fully integrate Nvidia's AI technology into semiconductor manufacturing processes; second, market rumors suggest TSMC plans to raise quotes for its 3nm process by up to 15% in the second half of 2026.

It is reported that under the cooperation plan, TSMC will adopt Nvidia's CUDA-X acceleration libraries and AI models in processes such as computational lithography, electronic structure simulation, advanced process control, and wafer fab operations optimization. TSMC stated that this move is expected to reduce lithography costs or cycles by 20% to 50% and increase chemical simulation speeds by an average of 50 times.

Regarding pricing, sources revealed that due to a surge in demand for AI chips, flagship mobile chips, and HPC, TSMC plans to raise quotes for its 3nm process by 15% in the second half of the year, with a potential further increase of 5% to 10% in 2027. For the 1.6nm process scheduled for launch in the second half of 2026, wafer quotes are expected to be as high as $45,000, approximately 50% higher than the current most advanced process price.

At today's GTC Taipei conference, Nvidia unveiled the "RTX Spark" PC chip using TSMC's 3nm process, with multi-brand products expected to hit the market starting in the fall of 2026. Since the PC market size is much smaller than TSMC's AI business, the product's short-term impact on TSMC's performance will be limited, serving more as a medium-to-long-term positive.

Spurred by multiple positive factors, TSMC rose over 2.5% in early trading but subsequently retreated to close flat. Market analysis suggests this was mainly due to profit-taking following substantial gains, while the Nvidia cooperation and price hike rumors had already been gradually reflected in the stock price prior to GTC. This year, TSMC's Taiwan-listed shares have gained over 50%, leaving many investors with significant floating profits. As the stock price hit a record high, profit-taking sell orders flooded the market, causing the gains to narrow rapidly.

In addition, the price hike rumors have not yet been officially confirmed, leading some cautious investors to reduce their positions at high levels while waiting for clearer signals from the shareholders' meeting on June 4.

In terms of financial performance, TSMC's gross margin reached 66.2% and its net margin was 50.5% in the first quarter of 2026. The company expects second-quarter revenue to increase to $39.0-$40.2 billion, with full-year USD revenue growth exceeding 30%.

Notably, the premium of TSMC's American Depositary Receipts (ADRs) ( TSM) over its Taipei-listed shares has dropped to a two-year low. The average premium in May was 13.7%, far lower than 26% in December last year. This year, TSMC's Taiwan-listed shares have gained over 50%, while ADRs have gained less than 40%, indicating that local investors' optimism regarding the AI cycle exceeds that of the US market.

TSMC will hold its annual shareholders' meeting on June 4. The market is focusing on the operational outlook for the second half of the year, capital expenditure directions, and the expansion of board seats.