TSMC reports record $12.9B profit as AI chip demand soars

Taiwan Semiconductor Manufacturing Company (TSMC) is expected to report a record-breaking 52% surge in second-quarter profit to T$377.4 billion ($12.9 billion) on Thursday, driven by soaring demand for advanced AI chips. However, the world’s largest contract chipmaker faces mounting concerns over potential U.S. tariffs under President Trump and a strengthening Taiwan dollar that could pressure future margins.

What you should know: TSMC’s anticipated quarterly profit would mark its highest-ever net income and sixth consecutive quarter of growth, reflecting the company’s central role in the AI boom.

• The company has already flagged a 38.6% rise in second-quarter revenue for the three months through June 30.
• Any profit result above T$374.68 billion would set a new company record, according to LSEG SmartEstimate compiled from 21 analysts.
• TSMC serves as a key supplier to major tech giants including Nvidia and Apple, positioning it at the heart of the AI chip supply chain.

The tariff threat: Trump’s trade policies pose significant uncertainty for TSMC’s future operations and profitability.

• Taiwan was threatened with a 32% reciprocal tariff rate in April but has yet to receive an updated figure that some other countries have been notified of.
• Trump indicated this month that tariffs on semiconductors are “likely to come soon,” though specific details remain unclear.
• The company acknowledged in June that U.S. tariffs were having “some indirect impact,” noting they can lead to slightly higher prices that may weigh on demand.

Currency headwinds: The Taiwan dollar’s 12% appreciation against the U.S. dollar this year is creating additional margin pressure for the chipmaker.

• TSMC has stated that a 1% appreciation in the Taiwan dollar typically reduces its gross margin by 0.4 percentage points.
• In June, the company revealed that Taiwan dollar strengthening had shaved more than 3 percentage points off its gross margin.
• This currency impact represents a significant headwind despite strong underlying demand for AI chips.

Strategic investments: TSMC has made substantial commitments to U.S. manufacturing operations, potentially mitigating some tariff risks.

• The company announced a $100 billion investment in the U.S. alongside Trump at the White House in March, adding to $65 billion previously pledged for three Arizona plants.
• Two of the Arizona facilities have already been built, demonstrating TSMC’s commitment to domestic U.S. chip production.

Market performance: Despite record profits, TSMC’s stock has reflected investor concerns about external pressures.

• Shares surged approximately 80% last year but have climbed just 5% year-to-date on worries about tariffs and unfavorable currency exchange rates.
• The company will report its headline profit figure at 0530 GMT, followed by an earnings call at 0600 GMT that will include third-quarter guidance.