TSMC record profit, $100bn US plan fail to halt chip sell-off
TSMC’s record quarterly profit and a massive $100 billion Arizona expansion underscore the structural strength of AI demand, yet stretched valuations are driving a sharp correction across Asian semiconductor stocks.
TSMC reported a record second-quarter profit of NT$706.6 billion ($22 billion), surging 77.4% year-on-year as the global AI infrastructure buildout overwhelms available chipmaking capacity. Quarterly revenue jumped 36% to NT$1.3 trillion, easily beating analyst estimates and surpassing the company's own previous record set in the first quarter.
The chipmaker now expects full-year 2026 revenue growth to be slightly above 40% in US dollar terms. "The AI megatrend continues to drive the need for more and more computation," chairman CC Wei said on an earnings call.
To address the extreme supply deficit, TSMC is rapidly escalating capital spending. Chief financial officer Wendell Huang said the 2026 capital expenditure budget will rise to between $60 billion and $64 billion. "At TSMC, a higher level of capital expenditures is always correlated to higher growth opportunities in the following years," Huang noted.
A significant portion of that capital will flow to the United States. TSMC will invest an additional $100 billion in Arizona, bringing its total planned US investment to $265 billion. The company will expand its Phoenix campus from three fabs to six, alongside two advanced packaging facilities. Wei specified the new fabs will produce logic wafers using 2-nanometre and below technologies.
Despite these blockbuster numbers, Asian semiconductor stocks suffered heavy selling on Thursday. Seoul’s Kospi plunged more than 6%, with rival chipmaker SK Hynix shedding over 11%. Tokyo’s Nikkei 225 dropped 2.8%, while Shanghai fell 1.9%.
The divergence between corporate performance and equity prices reflects growing anxiety over crowded trades. "The Philadelphia Semiconductor Index had risen roughly 83% this year, valuations had stretched," wrote Stephen Innes of SPI Asset Management. "Strong earnings and healthy demand can keep a trade alive, but they cannot prevent a correction when everyone already owns it."
Analysts broadly agree that the underlying demand for advanced chips remains robust. "The demand we see is structural, backed by massive, tangible capital expenditures from hyperscalers," said Simon Chen of Omdia, dismissing fears of a market bubble as overstated. Counterpoint Research analyst William Li added that demand for AI GPUs and advanced packaging continues to exceed expectations.
However, rapid expansion carries near-term financial risks. Li warned that "EUV (extreme ultra-violet lithography tools) supply constraints and overseas fab investments may limit capacity expansion and weigh on margins in the near term." Investors appear to be pricing in these margin pressures, deciding that even exceptional growth is already reflected in current share prices. "The numbers can still be excellent and the stocks can still fall," Innes said.
