TSMC Smashes Records Again as AI Chip Demand Drives Profit Surge

CNBC, AP, Reuters, and Business Insider contributed to this report.

TSMC just reminded the world why it’s the king of chipmaking. The world’s largest contract chipmaker reported a 35% jump in fourth-quarter profit, beating analyst estimates and hitting fresh all-time highs, thanks to skyrocketing demand for AI chips. This marks the company’s eighth straight quarter of year-over-year profit growth – a streak that few in tech can match.

Here’s a quick snapshot of TSMC’s blockbuster quarter:

• Revenue: NT$1.046 trillion ($33.7B), vs. NT$1.034 trillion expected;
• Net income: NT$505.7 billion ($16B), vs. NT$478.4 billion expected.

Revenue grew 20.5% year-over-year, while advanced chips measuring 7-nanometer or smaller made up 77% of total wafer revenue, highlighting TSMC’s dominance in the AI and high-performance computing space.

CFO Wendell Huang summed it up:

“We expect our business to be supported by continued strong demand for our leading-edge process technologies.”

In short, AI is still eating the semiconductor world, and TSMC is its main supplier.

TSMC’s high-performance computing division, which includes AI and 5G applications, accounted for 55% of quarterly sales, while smartphones contributed 32%. Advanced chips not only drive faster speeds and better energy efficiency but also carry fatter margins, which is why the company is leaning even harder into cutting-edge products like 2-nanometer chips, which recently entered mass production.

Analysts are bullish: Jake Lai from Counterpoint Research told CNBC that 2026 is shaping up to be “another breakout year” for AI server demand. That optimism is partly why TSMC is raising its capital expenditure to $52-$56 billion for 2026, up from $40.9 billion last year – a nearly 40% increase to expand production and advanced packaging.

TSMC isn’t just growing in Taiwan. The company is ramping up global production, with major projects in Arizona, Japan, and Europe. CEO C.C. Wei confirmed the purchase of additional land in Arizona to build a “gigafab cluster” aimed at improving productivity, lowering costs, and better serving US customers.

While overseas facilities may operate at lower margins compared to Taiwan, the expansion helps TSMC sidestep tariffs and get closer to major clients like Nvidia, AMD, and Apple. Wei stressed that AI demand is real – and big enough to justify this multi-billion-dollar bet.

With a market cap of around $1.4 trillion, TSMC now tops rivals like Samsung and Alibaba in Asia and is a major beneficiary of AI infrastructure spending by Big Tech giants, including Microsoft, Meta, and Alphabet. Its dominance in advanced chips gives it pricing power and a robust backlog, insulating it against short-term fluctuations in consumer electronics demand.

Taiwan-listed shares have soared 59% over the past 12 months, reflecting investor confidence that TSMC will continue to ride the AI wave through 2026 and beyond.

TSMC expects Q1 2026 revenue between $34.6B and $35.8B, up about 4% sequentially and roughly 38% year-over-year at the midpoint. The combination of AI-driven server demand, new 2nm production, and global expansion suggests the company isn’t slowing down anytime soon.

CEO Wei sounded both confident and cautious:

“AI is real. Not only real, it’s starting to grow into our daily life. But we need to invest carefully – overspending could be disastrous.”

For now, though, the AI trade looks alive and well. As TSMC continues to crank out the chips that power Nvidia GPUs, AMD processors, and the latest AI servers, the company isn’t just growing – it’s setting the pace for the entire semiconductor industry.

Bottom line: TSMC’s record quarter is more than just a beat – it’s a statement. AI demand is fueling profits, global expansion is in full swing, and the world’s tech giants are lining up for a piece of the action. Investors are cheering, and chip stocks across the board are riding the wave.

If you want, I can also make a shorter, punchy version for a tech news alert that really emphasizes the AI angle and the stock-market reaction. It would read like something you’d see on CNBC or MarketWatch. Do you want me to do that next?