Taiwan Semiconductor Manufacturing (TSM) Stock: Chip Giant Defies Gravity With 60% Profit Surge

TLDR

Table of Contents

Taiwan Semiconductor Manufacturing (TSMC) reported a 60% surge in Q1 profit to NT$361.56 billion ($11.12 billion), beating analyst expectations
Revenue increased 42% year-over-year to NT$839.25 billion ($25.53 billion)
TSMC forecasts strong Q2 revenue of $28.4-29.2 billion, maintaining guidance for mid-20% annual growth
The company expects revenue from AI-related servers and processors to double in 2025
TSMC shares have dropped 23% this year due to tariff concerns, though the company says it hasn’t yet seen changes in customer behavior

Taiwan Semiconductor Manufacturing (TSMC), the world’s top contract chipmaker, has reported a massive jump in first-quarter profit as demand for advanced chips continues to grow. The company’s performance exceeded market expectations despite ongoing concerns about potential tariffs.

Taiwan Semiconductor Manufacturing Company Limited (TSM)

TSMC’s profit for the first quarter surged 60% to NT$361.56 billion ($11.12 billion). This figure beat analysts’ consensus forecast of NT$351.65 billion, according to FactSet.

Revenue for the quarter reached NT$839.25 billion, representing a 42% increase year-over-year. In U.S. dollars, revenue came to $25.53 billion, up 35% from the same period last year, though down 5.1% from the previous quarter.

Strong Outlook Despite Uncertainties

Looking ahead to the second quarter, TSMC expects revenue between $28.4 billion and $29.2 billion. The midpoint of this range sits above market expectations.

The company is maintaining its guidance for mid-20% growth in sales this year. TSMC also expects revenue from artificial-intelligence-related servers and processors to double in 2025.

“Moving into second quarter 2025, we expect our business to be supported by strong demand for our industry-leading 3nm [nanometer] and 5nm technologies,” said Wendell Huang, TSMC’s Chief Financial Officer, in a statement.
However, Huang also acknowledged potential challenges. “While we have not seen any changes in our customers’ behavior so far, uncertainties and risks from the potential impact from tariff policies exist.”

TSMC is forecasting gross margins between 57% and 59% for the second quarter, with operating margins expected to be in the 47% to 49% range.

Tariff Tensions Loom Large

The strong results come against a backdrop of increasing trade tensions. President Donald Trump has implemented tariffs on countries across the globe, with the highest levies placed on China.

Last week, Trump temporarily exempted tech devices, such as smartphones and semiconductors, from his “reciprocal tariffs.” However, investor relief was short-lived after the U.S. imposed licensing requirements on some AI semiconductor exports to China.

Trump has also directly mentioned TSMC in his tariff discussions. Speaking at an event last week, the president said he told TSMC it could face a tax of up to 100% if it doesn’t shift more production to the U.S.

The president has repeatedly suggested he is considering imposing tariffs on chips produced outside the U.S., and it’s unclear if TSMC would receive a waiver despite pledging a total of $165 billion in U.S. investment.

These concerns have weighed on TSMC’s stock performance. American depositary receipts of TSMC have dropped 23% this year as chip companies’ shares succumbed to tariff worries.

U.S. Expansion Plans

In response to these pressures, TSMC is ramping up its U.S. presence. TSMC Chairman C.C. Wei said the company’s planned six factories in Arizona, when completed, will account for about 30% of global capacity in cutting-edge 2-nm chips and other advanced chips.

In March, the company announced plans to invest more than $100 billion to expand its operations in the U.S., including the construction of three new fabrication plants.

However, Wei played down speculation that TSMC could enter a partnership to help run the U.S. chip-manufacturing facilities of Intel. Without naming Intel, Wei said TSMC “is not engaged in any discussion with other companies” about joint ventures or technology sharing.

TSMC’s critical role in the tech ecosystem makes it a key player to watch. The company is the main supplier of chips to Nvidia—the leader in semiconductors used for AI applications. TSMC also makes the core processors inside Apple iPhones, Qualcomm mobile chipsets, and processors made by Advanced Micro Devices.

Wall Street remains largely optimistic about TSMC’s prospects despite the challenges. According to recent reports, TSM has a Strong Buy consensus rating based on five Buys and one Hold assigned in the last three months. The average TSMC price target of $240.83 implies 58.79% upside potential.

Wedbush analyst Matt Bryson maintained an Outperform rating on TSMC shares with a NT$1,300 price target ahead of the quarterly report. The stock closed at NT$847 on Thursday.

Following the earnings announcement, TSMC’s ADRs were up 3.3% in Thursday’s premarket trading.

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