Taiwan Semiconductor Manufacturing Co. just delivered numbers that underscore the unrelenting hunger for advanced chips. First-quarter net profit leaped 58% to a record NT$572.48 billion, about $18 billion, smashing estimates. Revenue climbed 40% year-over-year to $35.9 billion, with high-performance computing—code for AI accelerators—accounting for 61% of the total, up 20% from the prior quarter. Gross margins hit 66.2%, near the top of guidance. And capacity? Still rationed. Reuters captured CEO C.C. Wei’s words: AI demand remains ‘extremely robust,’ with customers and their customers signaling strength through 2026.
But here’s the rub. Advanced nodes tell the story. 3nm wafers made up 25% of revenue, 5nm 36%, 7nm 13%—74% from cutting-edge processes combined. Smartphone chips slipped to 26% of sales, down 11% quarter-over-quarter. Nvidia, Apple, AMD keep the lines humming, even as Middle East tensions loomed over early quarter shipments. No cracks yet. TSMC’s fabs in Taiwan churn at full tilt; Arizona ramps lag but advance.
So what happens next? Q2 revenue guidance calls for $39 billion to $40.2 billion, implying mid-teens sequential growth. Gross margins? 65.5% to 67.5%. Full-year outlook holds at over 30% revenue expansion in dollar terms, outpacing the foundry industry’s 14% average. Capex pours in at $52 billion to $56 billion, 30% more than last year, targeting 2nm ramps and U.S. expansion. Wei maintains ‘strong confidence.’ X post by @teslayoda.
This isn’t fleeting hype. Preliminary March revenue had already surged 45% year-on-year to NT$415 billion, pushing Q1 past $35.6 billion estimates. AI servers from hyperscalers gobble output. Citi analysts see Nvidia, Google, Amazon flooding orders; revenue doubling to $300 billion by 2030. Reuters Breakingviews. Yet bottlenecks multiply. ASML’s EUV machines—booked through 2027. HBM memory sold out into 2028. PCBs, lasers, testing gear: all stretched.
Competitors circle. Governments push Intel, Samsung to grab share. U.S. CHIPS Act funnels billions; TSMC’s Arizona fabs get $6.6 billion subsidy. Still, TSMC commands 62% gross margins, projected above that. Rivals trail on yields, nodes. Samsung’s foundry bleeds red; Intel’s 18A fights for traction.
Power grids strain too. U.S. utilities eye $1.4 trillion spend over five years for AI data centers. OpenAI, Anthropic burn $65 billion on compute this year alone. Amazon’s custom chips hit $20 billion run-rate; Meta inks $21 billion CoreWeave deal. Every dollar cycles back to TSMC’s doors. Wall Street Journal.
Geopolitics adds edge. Taiwan Strait risks loom large. TSMC diversifies: Japan, Germany join U.S., Europe fabs planned. China curbs hit, but AI export controls manageable, per Wei. Stock trades at 30 times earnings—rich, but forward growth justifies. Analysts like Bernstein flag 2Q margin upside.
Short bursts of doubt hit shares post-earnings. Investors parse every word. Days of inventory rose to 80, signaling 2nm buildup. But signals scream multi-year tailwind. AI isn’t slowing. Compute shortages persist. TSMC sits at the choke point. Fabs expand, yet demand pulls harder. That’s the new normal.
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