TSMC Sees Continued AI Strength

Core Viewpoint - Taiwan Semiconductor Manufacturing (TSMC) reported record financial results driven by strong demand for AI chips, surpassing Wall Street expectations and achieving all-time highs in revenue and net income [4][9]. Financial Performance - Net revenue for Q3 2025 reached NT$989.9 billion ($33.10 billion), a 30% increase from NT$759.7 billion in Q3 2024, beating expectations [3][4]. - Earnings per share rose to NT$17.44, up 39% from NT$12.54 a year earlier, also exceeding forecasts [3][9]. - Gross margin improved to 59.5%, an increase of 170 basis points year-over-year, while operating margin reached 50.6%, up 310 basis points from the previous quarter [3][6]. Market Dynamics - High-performance computing, including AI-related chips, constituted 57% of TSMC's revenue, up from 51% the previous year, indicating a significant shift towards AI-driven demand [5]. - Smartphone chips accounted for 30% of revenue, while chips for the Internet of Things and automotive sectors each represented 5% [5]. Strategic Outlook - TSMC raised its full-year revenue guidance from a 30% increase to the mid-30% range, reflecting strong demand and improved margins [6]. - The company is closely monitoring geopolitical uncertainties, particularly U.S. tariffs and restrictions on chips destined for China, which could impact future performance [6][8]. Market Reaction - Following the earnings report, TSMC shares initially opened higher but later declined by approximately 1.5% during midday trading, reflecting broader market trends [7]. Future Considerations - TSMC's leadership remains optimistic about ongoing AI demand, but investors are cautious due to geopolitical risks, despite the stock's nearly 50% increase in 2025 [8].