Taiwan Semiconductor Manufacturing Company (TSMC) delivered another record-breaking quarterly performance on Thursday, with third-quarter profit exceeding market expectations as booming artificial intelligence demand continued to drive semiconductor sales.
The world’s largest contract chipmaker also revealed that it is exploring additional manufacturing facilities in the United States, including a potential semiconductor plant in Texas.
TSMC reported net profit of T$763.06 billion ($23.55 billion) for the three months ending September 30, representing a nearly 69% increase from the previous year.
The result comfortably surpassed analysts’ expectations of T$746.3 billion, according to estimates compiled by Reuters and LSEG.
Meanwhile, quarterly revenue surged 50% year-on-year to T$1.49 trillion, highlighting the company’s strong position in the rapidly expanding AI chip market.
Profitability remained exceptionally strong, with TSMC reporting a gross margin of 66.4%, an operating margin of 58.7% and a net profit margin of 51.1%.
TSMC Considers New Texas Chip Factory as US Expansion Accelerates
TSMC is evaluating further expansion of its American manufacturing operations as demand for advanced semiconductor production continues to exceed available capacity.
During the company’s post-earnings conference call, CEO C.C. Wei confirmed that management had examined potential locations beyond its existing Arizona manufacturing operations.
Texas is among the locations being considered for additional semiconductor facilities.
Wei explained that TSMC is actively working to expand its US production capabilities to accommodate growing demand from major technology customers.
However, the company has not finalized the structure of any potential Texas investment.
Management is still evaluating whether new facilities would operate independently under TSMC or through partnerships with other companies.
One possibility under consideration involves collaboration with Elon Musk’s Terrafab initiative.
The discussions reflect TSMC’s broader strategy of expanding manufacturing capacity internationally while maintaining its technological leadership in advanced chip production.
Rising Capital Expenditure Could Pressure TSMC Profit Margins
Despite its exceptional financial performance, TSMC warned that aggressive manufacturing expansion could temporarily weigh on profitability.
Chief Financial Officer Wendell Huang explained that increasing production capacity in Taiwan and overseas would create additional costs in the coming years.
The company expects capacity expansion to reduce gross margins by approximately two percentage points in 2026.
Furthermore, overseas manufacturing operations could generate greater margin pressure in subsequent years as new facilities become operational.
Huang also projected a decline of at least 0.4 percentage points in gross margin during the fourth quarter.
The company expects capital expenditure to remain significantly elevated as it invests in additional factories, manufacturing equipment and advanced semiconductor technologies.
TSMC reaffirmed its 2026 capital spending budget of between $60 billion and $65 billion.
However, management did not provide specific estimates for how much overall manufacturing capacity would increase in the coming months.
The substantial investment reflects the growing infrastructure requirements of the global artificial intelligence industry.
Artificial Intelligence Demand Drives Record Semiconductor Growth
TSMC remains highly optimistic about the long-term outlook for artificial intelligence and advanced semiconductor demand.
Management expects revenue of between $52.3 billion and $54.3 billion in the fourth quarter, representing approximately 58% growth compared with the same period a year earlier.
Meanwhile, CEO C.C. Wei projected that full-year 2026 revenue would increase by approximately 44% in US dollar terms.
Wei emphasized that demand for AI-related semiconductors continues to strengthen as businesses expand their adoption of increasingly sophisticated artificial intelligence applications.
The growing use of agentic AI, which allows intelligent systems to perform complex tasks with greater autonomy, is emerging as another important driver of semiconductor demand.
According to TSMC’s management, semiconductors are expected to capture an increasingly significant share of the economic value generated by the global AI industry.
The latest earnings marked TSMC’s sixth consecutive quarter of record profits and its eleventh straight quarter of growth.
These results underline the company’s importance as a leading supplier of advanced computing technologies.
Advanced 2nm and 3nm Chips Strengthen TSMC’s Market Leadership
TSMC’s advanced manufacturing technologies remain central to its competitive advantage in the semiconductor industry.
During the third quarter, the company’s cutting-edge 2-nanometer chips accounted for 8% of total wafer revenue.
Meanwhile, its 3-nanometer technology contributed 33% of wafer revenue, demonstrating strong demand for advanced manufacturing processes.
These technologies are particularly important for developing high-performance processors used in artificial intelligence, data centers and other demanding computing applications.
As the world’s largest contract semiconductor manufacturer, TSMC occupies a critical position in the global technology supply chain.
Its customers include NVIDIA, one of the leading suppliers of processors powering modern AI infrastructure.
The rapid expansion of artificial intelligence has significantly increased demand for advanced chips, allowing TSMC to benefit from rising investment across the technology industry.
Consequently, investors frequently view the company’s financial performance as an important indicator of broader semiconductor demand.
ASML Earnings Reinforce Strong AI Chip Demand
TSMC’s impressive quarterly results followed encouraging earnings from Dutch semiconductor equipment manufacturer ASML Holding.
Earlier in the week, ASML also highlighted strong demand linked to artificial intelligence infrastructure investment.
The positive outlook from both companies suggests that semiconductor manufacturers and equipment suppliers continue to benefit from the global expansion of AI computing capacity.
However, the encouraging industry fundamentals contrast with recent weakness in technology stocks.
Semiconductor and artificial intelligence equities have faced substantial selling pressure as investors reassess the possibility of additional US interest rate increases.
Higher borrowing costs could create challenges for capital-intensive technology companies, particularly those financing major infrastructure projects through debt.
These concerns have contributed to a broader decline in AI-related stock valuations, despite continued growth in semiconductor demand.
TSMC Outlook Remains Strong Despite Market Volatility
TSMC’s latest financial results demonstrate the powerful influence of artificial intelligence on the global semiconductor industry.
Record quarterly profits, accelerating revenue growth and strong demand for advanced manufacturing technologies reinforce the company’s leading position in the market.
At the same time, its ambitious expansion plans in Taiwan and the United States highlight the enormous investment required to support future AI development.
Although rising capital expenditure could temporarily pressure profit margins, management remains confident that demand for advanced chips will continue expanding.
Investors will now focus on TSMC’s future earnings guidance, manufacturing expansion plans and the potential development of additional facilities in Texas.
The company’s ability to increase production capacity while protecting profitability could play a crucial role in determining its long-term financial performance.
