2025-07-19 14:02Summary of TSMC's Earnings Call and AI Market Insights Company: TSMC (Taiwan Semiconductor Manufacturing Company) Key Points from TSMC's Earnings Call 1. Financial Performance: TSMC's Q2 2025 revenue reached $30.07 billion, a year-over-year increase of 17.8%, with a gross margin of 58.6%, driven by the ramp-up of the N3 process platform and improved utilization of the N7 node [1][5][10]. 2. Future Revenue Guidance: TSMC raised its full-year revenue guidance for 2025 from 25% to 30%, maintaining capital expenditure expectations between $38 billion and $42 billion [10]. 3. Q3 Revenue and Margin Guidance: The revenue guidance for Q3 is set between $31.8 billion and $33 billion, with a gross margin expected to remain between 55.5% and 57.5% [11]. 4. Impact of Currency and Production Factors: The gross margin in Q3 is anticipated to be affected by the accelerated progress of overseas factories and the appreciation of the New Taiwan Dollar, although product structure optimization and price increases in advanced processes may mitigate some negative impacts [12]. 5. AI Market Demand: TSMC expects a significant increase in AI computing demand in the second half of 2025, driven by both inference and training needs, which is a unique situation compared to previous years [2][3]. 6. N5 Node Demand: There is a tight demand for the N5 node, leading to a transfer of some N7 capacity to meet this demand, which has positively impacted the gross margin for Q2 [9]. 7. COWOS Capacity: The COWOS capacity remains very tight in 2025, with expectations for improvement by 2026, but still indicating a supply shortage [3][17]. 8. Advanced Process Price Increases: TSMC anticipates a price increase of 6% to 10% for advanced processes in early 2026, which will support ASP growth and long-term gross margin stability [18]. 9. N2 Node Production: The N2 node is expected to begin volume production in the second half of 2025, with revenue contributions anticipated to be twice that of the N3 node in its first two years [19]. 10. Overseas Factory Progress: TSMC's overseas factories are progressing well, with one factory already in mass production and others under construction, which may accelerate to meet North American demand [21]. Insights on AI Market Dynamics 1. Role of Tokens in AI Applications: All AI applications operate on tokens, which are essential for their functioning. The relationship between token consumption and computing power generation is non-linear, indicating that a surge in applications or token volume will lead to a significant increase in computing demand [4][24]. 2. NVIDIA's Influence: NVIDIA's chip yield and system stability are critical for future AI computing demand. In a supply-constrained environment, these factors could enhance NVIDIA's profit margins and impact the overall market size [7][23]. 3. Focus on Large Models: Research in the global AI computing market should prioritize large models and application changes rather than merely tracking production data from Taiwan [8]. 4. Investment Considerations: Investors face challenges in identifying breakout applications due to high technical barriers. However, the trend in computing demand is clearer and can serve as a basis for investment decisions [27]. 5. Non-AI Market Recovery: The non-AI market is showing signs of improvement, particularly in the industrial and automotive sectors, although traditional consumer electronics remain cautious [13]. 6. Future of Humanoid Robots: The humanoid robot market is in its early stages, with potential applications in the medical field, and is expected to be significantly larger than the electric vehicle market [15]. 7. AI Accelerator Demand: Demand for AI data centers and accelerators remains strong, with TSMC's technological advantages becoming evident as it transitions from N3 to N2 [14]. Additional Considerations 1. Supply and Demand Dynamics: The AI application demand for tokens has no upper limit, but the supply side is currently constrained, highlighting the importance of improving supply efficiency at key nodes like TSMC and NVIDIA [26]. 2. Market Trends and Predictions: The understanding of token economics and its implications for supply and demand is crucial for anticipating market trends and making informed investment decisions [25].