This article first appeared on GuruFocus.
Taiwan Semiconductor Manufacturing Co. (TSM, Financials) is doing well and looking ahead. The world’s largest contract chipmaker’s fourth-quarter profit surged 35%, exceeding expectations due to rising demand for Nvidia and Apple’s artificial intelligence processors. For the quarter ended December 31, 2025, TSMC earned NT$505.7 billion, or NT$19.50 per share. Revenue reached NT$1.046 trillion, exceeding expectations by 25.5%. Business reports that 77% of wafer revenue comes from 7nm and smaller AI and 5G circuits. This shift toward advanced processors helps TSMC. On the earnings call, management said our high-performance computing business continues to drive growth, supported by strong artificial intelligence demand. TSMC expects sales in the first quarter of 2026 to be US$34.6 billion to US$35.8 billion, with a gross profit margin of 63% to 65%. Most of this year’s $56 billion investment will be in 2-nanometer technology. Management expects annual dollar revenue growth of 30%. Analysts expressed optimism after the report was released. Counterpoint Research’s Jake Lai said TSMC’s rollout of 2nm circuits and improved packaging puts the company in a strong position in 2026, but falling demand for smartphones and PCs could have an impact. TSMC’s stock price rose more than 6% in pre-market trading after the survey results were released, indicating investors’ confidence that the company remains at the vanguard of the global AI chip boom.