TSMC Reports Record Profit on AI Boom, Warns of Tariff Risks

Taiwan Semiconductor Manufacturing Co posted a record quarterly profit driven by surging demand for artificial intelligence chips, but cautioned that U.S. tariffs could impact earnings later in the year.

Credit: TSMC

The world’s leading producer of advanced AI chips reported net profit of T$398.3 billion (USD 13.5 billion) for April to June, a 60.7% increase year-on-year and its fifth consecutive quarter of double-digit growth. The result beat market expectations of T$377.9 billion.

Credit: TSMC

TSMC forecast up to 40% revenue growth for the current quarter and raised its full-year revenue outlook to around 30% in USD terms, up from a previous estimate of “close to the mid-20s.”

Chief Executive C.C. Wei said AI demand was “getting stronger and stronger,” and highlighted that key customer Nvidia had resumed sales of its H20 AI chip to China following U.S. government approval.

“China is a big market, and my customer can continue to supply the chip to the big market, and it’s very positive news for them and in return it’s very positive news for TSMC,” Wei said.

However, Wei warned that fourth-quarter earnings could face headwinds due to potential U.S. tariffs and other uncertainties, although no changes in customer behaviour had been observed yet.

The company also noted that the Taiwan dollar’s 12% appreciation against the U.S. dollar this year would pressure margins. TSMC expects its third-quarter gross margin to fall to between 55.5% and 57.5%, down from 58.6% in the second quarter.

Additional margin pressure is expected from increased investment in new factories in the U.S. and Japan. Despite this, TSMC maintained its capital expenditure plan of USD 38 billion to USD 42 billion for the year.

Chief Financial Officer Wendell Huang said it was “very unlikely” that capital spending would drop suddenly.

TSMC previously announced a USD 100 billion investment in the U.S., including USD 65 billion for three plants in Arizona, one of which is operational. However, former U.S. President Donald Trump has indicated that semiconductor-specific tariffs could be introduced soon.

Taiwan was also threatened with a 32% reciprocal tariff rate in April, though it has not yet received an updated figure.

Allen Huang, vice president at Mega International Securities Investment Services, said TSMC’s second-half earnings could also be affected if Apple’s sales underperform. Apple, another major TSMC client, typically launches new products in the fourth quarter.

“One warning sign is that Apple’s sales in China have been soft,” Huang said, noting this may be contributing to TSMC’s cautious outlook.

Credit: TSMC

TSMC shares, which surged 80% last year, have risen only 5% so far this year amid concerns over tariffs and currency exchange rates.

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• TSMC posted a record USD 13.5 billion profit in Q2, up 60.7% year-on-year

• AI chip demand and Nvidia’s resumed China sales boosted outlook

• Company warns of potential Q4 impact from U.S. tariffs and strong Taiwan dollar

Source: REUTERS