TSMC falls 2% for 6th straight loss on $100B capex plan

Taiwan Semiconductor Manufacturing Co. sank 2% to $411.01 on Thursday, extending its losing streak to six sessions, after the chipmaker unveiled a $100 billion US expansion that pushed annual capital expenditure to as much as $64 billion.

"The AI megatrend continues to drive the need for more and more computation," Chairman and Chief Executive Officer C.C. Wei said on the earnings call. "I believe from this day on, all the way to probably 2029, 2030, the demand is very strong."

TSMC reported record net profit of NT$706.6 billion ($22 billion) for the April-June quarter, up 77% from a year earlier and above analyst expectations. Revenue rose 36% to NT$1.27 trillion ($39 billion). The company raised its 2026 revenue growth forecast to slightly above 40%, up from an earlier estimate of over 30%, and increased its annual capital expenditure budget to $60 billion to $64 billion from $52 billion to $56 billion.

The capex increase — part of a plan to build four additional fabrication plants in Arizona focused on 2-nanometer chips and below — brings TSMC's total US investment pledge to $265 billion. The spending spree threatens to compress margins in the near term even as AI demand remains robust, a dynamic that has left investors weighing long-term growth against short-term profitability.

The world's largest contract chipmaker and a key supplier to Nvidia Corp. and Apple Inc. is racing to expand capacity as AI-related demand for computing power surges. TSMC's Arizona campus will eventually house 10 fabrication facilities, making some of the most advanced chips at the 2-nanometer node and below — a process technology (where more transistors fit per square millimeter, improving performance per watt) that competitors Samsung Foundry and Intel Corp. are still struggling to match in volume production.

The additional $100 billion commitment follows a US-Taiwan agreement earlier this year that cut American tariffs on Taiwanese goods in exchange for roughly $250 billion in Taiwanese tech investments. TSMC had already committed $165 billion to its Arizona operations before Thursday's announcement.

William Li, a senior analyst in semiconductors at Counterpoint Research, said the ramped-up investment plans are "essential to support long-term growth" and to keep pace with demand from TSMC's leading US customers. The company did not disclose how the additional capex would affect its gross margin trajectory.

TSMC shares now trade at roughly 18 times forward earnings, below their five-year average of 22 times, as the market prices in margin pressure from the accelerated spending. The Philadelphia Semiconductor Index fell alongside TSMC, reflecting broader concern that the industry's capital intensity is rising faster than revenue can absorb it. For Nvidia, which relies on TSMC for its H100 and Blackwell-series chips, the expanded capacity could ease supply constraints that have limited GPU shipments over the past two years — but only if TSMC can execute its aggressive timeline without further margin erosion.

This article is for informational purposes only and does not constitute investment advice.