TSMC Sees Record Profit Growth of 61% in Q2 Due to Strong Demand for AI Chips, Beating Estimates

The Taiwan Semiconductor Manufacturing Company (TSMC) announced a significant 61% year-on-year increase in second-quarter profits, surpassing expectations, driven by the sustained demand for artificial intelligence (AI) chips. This profit growth marks a record high for TSMC’s net revenue, which increased by 38.65% to NT$933.80 billion compared to the same quarter last year.

TSMC’s shares experienced a nearly 6% uptick on the trading platform Robinhood at 2:25 a.m. ET. As the world’s largest contract chip manufacturer, TSMC has capitalized on the global megatrend towards AI by producing advanced AI processors for key clients such as Nvidia and Apple.

Brady Wang, Associate Director at Counterpoint Research, attributes TSMC’s growth to the robust demand for AI-related chips, particularly in leading-edge nodes below 7nm. Smaller nanometer sizes in semiconductor technology signify more compact transistor designs, resulting in greater processing power and efficiency. In the second quarter, advanced chips with sizes 7-nanometer or smaller accounted for 74% of TSMC’s total wafer revenue.

Wang notes that the surging demand from the AI boom is highly sustainable in the near term, as AI continues to expand across various industries. However, TSMC faces potential challenges from the trade policy of the U.S. President Donald Trump, who has imposed tariffs and threatened further duties on Taiwan. Taiwan currently faces 32% tariffs announced in April, with ongoing trade talks between the U.S. and local media reporting an active negotiation process.

Furthermore, U.S. export controls have impacted TSMC’s business with China, as well as that of its key clients like Nvidia and AMD. However, recent thawing of trade relations between Beijing and Washington has allowed Nvidia and AMD to receive government assurances enabling them to ship products to China.

Additional headwinds for TSMC in the second half of the year include potential order cuts from smartphone and PC clients due to global macroeconomic conditions, as well as appreciation of the Taiwan dollar, according to Sravan Kundojjala, an analyst at SemiAnalysis specializing in global foundries.