TSMC Stock: Why I Have No Plans To Sell

The semiconductor industry is no stranger to volatility, but for investors with a long-term horizon, Taiwan Semiconductor Manufacturing Company (TSMC) remains a fortress of stability and growth. Despite recent cautionary signals from suppliers like ASML, TSMC's financial performance, strategic positioning in the AI revolution, and unrelenting demand for its advanced chips make it a compelling case for a buy-and-hold strategy. Let's unpack why TSMC's long-term thesis is unshakable—and why short-term turbulence should be viewed as noise, not a red flag.

Unparalleled Financial Performance: A Foundation for Resilience

TSMC's Q2 2025 results were a masterclass in operational excellence. Consolidated revenue hit $30.07 billion, a 44.4% year-over-year surge, while net income soared 60.7% to $13.5 billion. Margins—gross (58.6%), operating (49.6%), and net (42.7%)—were all above industry benchmarks, underscoring the company's pricing power and cost discipline. These figures aren't just numbers; they reflect TSMC's dominance in manufacturing the most complex chips on the planet.

The company's capital expenditure (capex) plan for 2025, ranging between $38 billion and $42 billion, further cements its commitment to scaling AI-driven production. With 74% of its wafer revenue now coming from 7-nanometer and smaller nodes, TSMC is not just riding the AI wave—it's engineering the ship.

AI as a Perpetual Engine of Demand

The AI boom is not a passing trend but a structural shift in global computing. TSMC's HPC segment, which includes AI and 5G chips, now accounts for 60% of its revenue, up from 52% in 2024. This growth is fueled by partnerships with tech titans like Nvidia and Apple, both of which rely on TSMC's advanced manufacturing to power their AI and consumer hardware.

ASML's recent guidance—while more cautious than in prior years—actually reinforces TSMC's position. ASML's Q2 EUV sales (€2.3 billion) and strong service revenue (€2.1 billion) highlight the critical role of its lithography tools in enabling TSMC's advanced-node production. Even as ASML tempers its 2026 outlook due to geopolitical risks, its 2025 performance validates the continued demand for the next-generation chips TSMC is poised to produce.

Addressing the Short-Term Noise: Volatility vs. Long-Term Value

Critics may point to ASML's tempered 2026 guidance or U.S. export restrictions as risks to TSMC's growth. However, these factors are already priced into the market and do not negate the company's core strengths. For instance:
- ASML's Cautious Outlook: While ASML's 15% 2025 sales growth target is below historical averages, its current momentum in EUV shipments and installed base management (IBM) business ensures TSMC will have the tools needed to maintain its lead in 3nm and 1.4nm node development.
- Geopolitical Risks: TSMC's $165 billion in U.S. manufacturing commitments (existing $65 billion plus new $100 billion) insulates it from regulatory headwinds and positions it as a geopolitical asset rather than a liability.

Moreover, TSMC's balance sheet is a fortress. With $50 billion in cash reserves and a dividend yield of 0.8%, the company offers both growth and income—rare traits in today's market.

The Case for Buy-and-Hold

For investors, the key takeaway is simple: TSMC's long-term trajectory is powered by forces no short-term volatility can derail. The AI revolution requires ever-advanced chips, and TSMC is the only foundry capable of producing them at scale. Its financial discipline, strategic capex, and symbiotic relationship with ASML ensure it will remain the industry's linchpin.

Short-term risks—tariffs, currency fluctuations, or macroeconomic slowdowns—are real but manageable. TSMC's CEO, C.C. Wei, has repeatedly emphasized that AI demand remains “robust and unrelenting,” a sentiment echoed by clients like Apple and Nvidia.

Conclusion: A Stock for the Ages

TSMC is not just a semiconductor company; it is the bedrock of the AI era. While ASML's guidance may introduce near-term noise, it also underscores the critical role of advanced manufacturing in sustaining AI's growth. For patient investors, TSMC's combination of financial strength, technological leadership, and structural demand creates an unshakable long-term thesis.

In a world of fleeting trends, TSMC is a constant. And for those who understand the power of compounding and the inevitability of AI's rise, there's no reason to sell.