TSMC Sees Strong Demand for AI, Warns of Tariff Impact on Manufacturing

Taiwan Semiconductor Manufacturing Co Ltd (TSMC) reports strong AI demand and warns of the impact of tariffs on its business. As a leading provider of integrated circuit manufacturing services, TSMC offers a range of services including process technology, special process technology, and design ecosystem support. The company has completed the transfer and mass production of 5nm technology and is researching 3nm and 2nm process technologies. TSMC's products cover the entire electronic application industry, including personal computers, information application products, and wired and wireless communication system products.

Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) has reported robust growth expectations for 2025, driven primarily by strong demand for artificial intelligence (AI) applications. At its annual shareholders’ meeting on June 3, TSMC Chairman and CEO C.C. Wei reaffirmed that the company's U.S. dollar revenue is expected to grow by 24% to 26% this year [1]. This growth is expected to outpace the industry average, fueled by the ongoing demand for AI-related products and a moderate recovery in other end markets.

However, Wei also highlighted potential risks posed by tariffs. While TSMC operates as an exporter and is not directly impacted by tariffs applied to importers, the company anticipates that tariffs could lead to modest price increases, which might soften demand [1]. Wei emphasized that a drop in demand could potentially affect TSMC’s business but reassured that AI-related demand remains exceptionally strong and continues to outpace supply [1].

In April, TSMC announced consolidated revenue of USD 25.53 billion for the first quarter ended March 31, 2025. For the second quarter, revenue is projected to range between USD 28.4 billion and USD 29.2 billion, with a gross margin of 57% to 59% [1]. The company has also been considering raising prices for 4nm chip production at its U.S. facility by up to 30%, driven by strong demand and higher operating costs [1].

Exchange rate fluctuations have also impacted TSMC's revenue. With the NT dollar strengthening by nearly 8%, TSMC's gross margin is expected to fall by over 3 percentage points [1]. Wei noted that every 1% appreciation of the NT dollar cuts TSMC’s gross margin by 0.4 percentage points.

In response to a shareholder question about potential fab construction in the Middle East, Wei unequivocally stated that TSMC has no plans for such an expansion [1]. Earlier rumors suggesting U.S. officials had encouraged TSMC to invest in Intel’s foundry business were also dismissed by Wei during the company’s April earnings call [1].

The stock of Taiwan Semiconductor Manufacturing Company Limited (TSM) has seen increased institutional investment. GuoLine Advisory Pte Ltd purchased 73,000 shares of the semiconductor company's stock during the first quarter, valued at approximately $12,118,000 [2]. Other institutional investors, including FMR LLC, Sanders Capital LLC, Capital World Investors, Capital International Investors, and Van ECK Associates Corp, have also increased their stakes in TSM [2].

TSM stock has been the focus of several research reports. Citigroup and Needham & Company LLC have reissued "buy" ratings on TSM, with Needham & Company LLC setting a $225.00 price objective [2]. Analysts have set a consensus price target of $212.00, reflecting a "Moderate Buy" rating [2].

References:
[1] https://www.trendforce.com/news/2025/06/03/news-tsmc-reportedly-reaffirms-2025-sales-growth-of-24-26-warns-tariffs-may-push-up-prices/
[2] https://www.marketbeat.com/instant-alerts/filing-guoline-advisory-pte-ltd-purchases-shares-of-73000-taiwan-semiconductor-manufacturing-company-limited-nysetsm-2025-05-30/