TSMC's Strategic Expansion in the U.S. and Its Implications for Long-Term Growth and Geopolitical Resilience

Taiwan Semiconductor Manufacturing Company (TSMC) has emerged as the linchpin of the global semiconductor industry, and its recent $100 billion expansion in the United States—bringing its total U.S. investment to $165 billion—marks a pivotal moment in the reshaping of global supply chains and technological leadership. For investors, this move is not just a corporate milestone but a strategic recalibration that aligns with three critical megatrends: geopolitical tailwinds, supply chain diversification, and the explosive demand for artificial intelligence (AI). TSMC's dominance in advanced packaging technologies like CoWoS, combined with its 60% share of high-performance computing (HPC) revenue (a proxy for AI-related demand), positions it as an essential player in the next phase of the tech-driven economy. Here's why TSMC is a must-own for investors seeking exposure to the AI and tech-led future.

Geopolitical Tailwinds: A Semiconductor Pivot in the U.S.-China Tech Cold War

The U.S. investment by TSMC is a direct response to the intensifying U.S.-China tech rivalry. Semiconductors, the lifeblood of modern technology, have become a strategic asset in this conflict, with the U.S. government incentivizing domestic production through the CHIPS and Science Act. TSMC's $165 billion commitment—largely backed by $6.6 billion in direct subsidies and $5 billion in low-cost loans—ensures its role as a key enabler of U.S. national security and economic competitiveness.

The Trump administration's emphasis on “economic security” and its push for tariffs on imported chips have further accelerated this pivot. While critics argue that subsidies distort markets, TSMC's decision to build five new U.S. fabrication plants (fabs), two advanced packaging facilities, and an R&D center in Arizona reflects a calculated bet on sustained U.S. policy support. This expansion not only secures TSMC's access to capital and talent but also aligns with Washington's goal of reducing reliance on Chinese manufacturing for critical technologies. For investors, this means TSMC is now deeply embedded in the U.S. geopolitical strategy, a position that offers long-term stability and growth.

Supply Chain Resilience: Diversification as a Strategic Imperative

The global semiconductor supply chain has long been concentrated in East Asia, with TSMC and its Taiwanese peers producing 92% of the world's most advanced chips. While this concentration has driven efficiency, it also created vulnerabilities, as seen during the 2020-2022 chip shortage. TSMC's U.S. expansion is a deliberate effort to diversify its footprint, reducing exposure to geopolitical risks in Southeast Asia and ensuring redundancy in production.

The Arizona facilities, for instance, will focus on 2nm and 3nm process nodes and advanced packaging like CoWoS, which are critical for AI accelerators and high-performance computing. By 2028, TSMC aims to scale CoWoS production to 150,000 wafers per month, a capacity that will support U.S. leadership in AI and data centers. This diversification is not just about location—it's about creating a resilient supply chain that can withstand disruptions from trade wars, natural disasters, or cyberattacks. For investors, TSMC's ability to balance scale with agility is a compelling value proposition.

AI-Driven Demand: TSMC's 60% HPC Revenue and the CoWoS Advantage

The AI revolution is TSMC's most potent growth engine. In Q1 2025, HPC (high-performance computing) accounted for 60% of TSMC's wafer revenue, driven by demand for AI chips from hyperscalers, cloud providers, and semiconductor designers like NVIDIA and AMD. TSMC's advanced packaging technologies, particularly CoWoS, are the backbone of this demand.

CoWoS enables the integration of multiple chiplets and high-bandwidth memory (HBM) on a single substrate, a critical enabler for AI accelerators. NVIDIA's H100 and B100 GPUs, for example, rely entirely on CoWoS for their performance in AI training and inference. TSMC's CoWoS capacity is projected to reach 65,000–75,000 wafers per month in 2025, with 63% of this demand coming from NVIDIA alone. This gives TSMC a near-monopoly on the most advanced packaging technology, creating a moat that is difficult to replicate.

Investment Thesis: TSMC as a Cornerstone of the AI Era

For investors, TSMC's U.S. expansion and AI-driven demand present a unique confluence of tailwinds. Its financial strength—evidenced by a 58.6% gross margin and a 38.6% YoY revenue increase in Q1 2025—supports its ability to reinvest in R&D and scale production. The company's $165 billion investment in the U.S. is not just a bet on AI; it's a commitment to maintaining its technological edge against rivals like Samsung (which holds 7.7% of the pure-play foundry market) and SMIC.

Moreover, TSMC's partnerships with U.S. tech giants like Apple, NVIDIA, and AMD ensure a stable pipeline of orders. Its workforce development initiatives, including apprenticeship programs and collaborations with universities, further solidify its long-term competitiveness.

Risks and Considerations

While TSMC's position appears unassailable, risks remain. Execution challenges in scaling U.S. facilities could delay timelines, and geopolitical shifts—such as a potential Biden administration reversing Trump-era policies—could alter the subsidy landscape. Additionally, the high capital intensity of semiconductor manufacturing means TSMC must maintain strong cash flow to fund its $38–42 billion 2025 capex budget.

However, these risks are mitigated by TSMC's dominant market position, its strategic alignment with U.S. policy, and the secular growth of AI. For long-term investors, the company's ability to navigate these challenges while capturing 60% of HPC revenue and 35% of the “Foundry 2.0” market makes it an indispensable holding.

Conclusion

TSMC's U.S. expansion is more than a corporate investment—it's a strategic repositioning that aligns with the global shift toward AI, supply chain resilience, and geopolitical security. By leveraging U.S. subsidies, scaling advanced packaging technologies, and securing a dominant role in the AI ecosystem, TSMC is not just future-proofing its business but also reshaping the semiconductor industry. For investors, the company offers a rare combination of growth, stability, and geopolitical tailwinds, making it a must-own in a portfolio focused on the tech-led economy. As AI becomes the new electricity, TSMC is the power plant.