Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM)
Company Overview TSMC stands alone as the world’s most critical technology company, commanding over 70% of the global foundry market and serving as the exclusive manufacturer of the most advanced AI chips for Nvidia, Apple, AMD, Qualcomm, and Broadcom. The Taiwan-based semiconductor giant reported Q2 2025 earnings in July that shattered expectations, with net profit surging 61% year-over-year to record levels while management raised full-year revenue guidance to approximately 30% growth in U.S. dollar terms, up from the mid-20% range previously forecast.
What makes TSMC particularly compelling right now is its unassailable technological moat in advanced process nodes. Nearly 74% of Q2 2025 wafer revenue came from 7-nanometer and smaller technologies, with 3nm chips alone contributing 24% of revenue. The company’s pre-order demand for its upcoming 2nm chips has already exceeded that of existing 3nm and 5nm nodes, positioning TSMC to capture virtually all high-performance AI chip manufacturing through 2026 and beyond. With capital expenditures projected at $38-42 billion for 2025 (up 34% from 2024), TSMC is investing aggressively to meet exploding AI infrastructure demand that shows no signs of slowing.
Key Technical and Fundamental Drivers
Record Q2 Results → 61% Profit Surge TSMC’s July earnings report showed Q2 2025 net profit jumped 61% year-over-year to record highs, with Q3 revenue guidance of $31.8-33.0 billion representing 38% YoY growth and 8% sequential increase.
Raised 2025 Outlook → 30% Revenue Growth Management upgraded full-year revenue growth guidance to approximately 30% in U.S. dollar terms, up from mid-20% previously, cementing TSMC’s position as the primary beneficiary of AI infrastructure buildout.
Dominant Market Share → 70.2% of Global Foundry Revenue TSMC captured a record 70.2% of global foundry revenue in Q2 2025, generating over $30 billion as competitors Samsung and Intel struggle with losses and layoffs in their foundry operations.
Advanced Node Leadership → 74% from 7nm and Below Nearly three-quarters of wafer revenue comes from cutting-edge process technologies essential for AI accelerators, HPC servers, and premium mobile chips that only TSMC can manufacture at scale.
2nm Pre-Orders Exceeding Expectations → 2026 Launch Demand for TSMC’s next-generation 2-nanometer chips has already surpassed that of existing 3nm and 5nm nodes, with Apple, Nvidia, and other major customers securing capacity for 2026 production.
Market Takeaway TSMC represents the purest play on AI infrastructure growth, with the company serving as the irreplaceable manufacturer for virtually every advanced AI chip in the world. The July earnings report’s 61% profit surge and raised guidance to 30% revenue growth validate that AI spending remains robust despite periodic market concerns. TSMC’s competitive moat is nearly insurmountable – building competing advanced foundries requires $20-30 billion in capital, decades of manufacturing expertise, and access to ASML’s $380 million extreme ultraviolet lithography machines that TSMC has mastered.
The key insight is that TSMC doesn’t just manufacture chips; it enables the entire AI revolution. When Microsoft announces $80 billion in data center spending, when Nvidia deploys million-GPU clusters, when Apple launches new AI-enabled devices – all roads lead to TSMC’s foundries in Taiwan and increasingly in Arizona. The company’s $100 billion U.S. investment provides both geopolitical insurance and capacity expansion, with the first Arizona facility already in high-volume production using advanced technology nodes.
At less than 20 times forward earnings following recent market volatility, TSMC offers compelling value for a company growing revenue at 30% with gross margins near 59% and operating margins close to 49%. The 2nm chip pre-orders exceeding expectations demonstrate sustainable demand visibility through 2026, while CoWoS advanced packaging capacity expanding from 35,000 to 90,000 wafers per month by 2026 addresses the bottleneck in AI chip production. With the AI chip market projected to reach $500 billion by 2028 (per AMD’s Lisa Su) and TSMC commanding over 70% share in advanced manufacturing, the company’s dominance in the most critical technology of our era makes it a foundational holding for investors seeking exposure to AI infrastructure growth.