TSMC Stock Poised to Hit Record High on Blockbuster Q2 Earnings Fueled by AI Frenzy — But Warns of Potential Slowdown

After AI hype pushed U.S. stocks to new highs and Nvidia’s market cap surpassed $4 trillion, TSMC takes the spotlight with its Q2 earnings. As the world’s largest chip foundry, TSMC once again delivered blowout results—driven by the red-hot AI boom and a chip stockpiling spree sparked by Trump’s tariff threats. Yet the market’s bigger question is whether the AI momentum will continue its sharp upward curve or turn amid demand saturation.

The stock surged over 4% overnight and is poised to hit a record high at the opening bell.

Earnings Beat Across the Board

TSMC reported Q2 revenue of $30.07 billion, up 44% year-over-year in USD terms (39% in NT$), and 17% quarter-over-quarter—well above its high-end guidance of $29.2 billion. Net profit hit $12.8 billion, a 67% increase YoY (61% in NT$). The weaker U.S. dollar in Q2 also helped boost the numbers when translated from local currency.

Driven by the dual engines of iPhone demand and AI, gross margin came in at 58.6%, down 0.2 percentage points from last quarter but up 5.4 points YoY.

3nm + 5nm + 7nm Nodes Account for 74% of Revenue; HPC Segment Hits 60%

According to the report, 3nm chips accounted for 24% of total revenue, up 2 points from last quarter—driven by a surge in iPhone purchases ahead of Trump’s tariffs and a rebound in demand in China supported by local subsidies.

The 5nm segment, a key driver for AI chips, held steady at 36%. Global tech giants continue to pour money into AI infrastructure, fueling demand for Nvidia and AMD GPUs.

Meanwhile, revenue contribution from 7nm chips declined slightly to 14%. Altogether, advanced nodes (3+5+7nm) made up 74% of total revenue, up 1 point quarter-over-quarter, signaling a continued shift toward high-end chips.

From a platform perspective, high-performance computing (HPC) grew to account for 60% of total revenue, up 1 point QoQ. This underscores ongoing momentum in AI and data center products, with Big Tech and sovereign wealth funds escalating the AI arms race—making Nvidia’s chips a hot commodity. Smartphone chip revenue dropped 1 point to 27%, but the decline has stabilized. Interestingly, the simultaneous rise in 3nm revenue and drop in mobile chip share highlights the iPhone as a major beneficiary this quarter.

Both IoT and automotive segments remained flat, each contributing 5% to revenue.

Q3 Revenue Set for New High, Full-Year Guidance Raised to 30%

Beyond the solid Q2 numbers, the market is laser-focused on TSMC’s Q3 and full-year outlook, as it offers clues on the AI trajectory.

TSMC guided Q3 revenue in the range of $31.8–33.0 billion, with the midpoint implying 38% YoY growth and 8% QoQ growth. Gross margin is expected to land between 55.5% and 57.5%—still elevated, though potentially pressured by U.S. fab ramp-up costs and tariffs. This is a highly bullish forecast, suggesting the AI boom remains in full swing despite some chip hoarding by tech giants.

TSMC also raised its full-year revenue growth forecast to 30%, up from its previous 20–30% range. With over 35% growth already booked in the first two quarters and a strong Q3 outlook, the new guidance reflects rising confidence. However, the 30% target also implies a potential sharp slowdown in Q4 growth—raising questions about whether the company is being cautious or signaling an inflection point in AI demand.

To prepare for tariff risks, TSMC is accelerating construction of its second Arizona plant. Capex remains unchanged at $38–42 billion for the year.

To conclude, TSMC delivered another quarter of stellar results, underscoring that even after a wave of panic buying, AI demand remains resilient into Q3. Fundamentally, AI is likely to remain the dominant theme for global tech in the near term. But with growing geopolitical risk and signs of potential saturation ahead, investors should stay alert for any shifts beneath the surface.