TSMC's Sustained AI-Driven Growth Amid Slowing Momentum

The global semiconductor industry is at a crossroads. As artificial intelligence (AI) reshapes the technological landscape, TSMC, the world's leading contract chipmaker, has emerged as both a beneficiary and a linchpin of this transformation. Yet, even as the company reports record profits and dominates advanced-node manufacturing, signs of moderation in its growth trajectory have begun to surface. This article examines TSMC's long-term investment viability in the face of near-term challenges, balancing its unparalleled technical advantages with emerging risks in a rapidly evolving market.

A Record-Breaking Foundation

TSMC's financial performance in 2023–2025 underscores its dominance in the AI chip ecosystem. In Q3 2025, the company reported a 39% year-on-year surge in net profit to NT$452.3 billion ($14.77 billion), driven by surging demand for high-performance computing (HPC) chips, which accounted for 57% of its quarterly sales, according to a Carbon Credits report. Advanced process technologies-3nm, 5nm, and 7nm nodes-contributed 74% of wafer revenue, with 5nm and 3nm nodes alone accounting for 37% and 23%, respectively, according to the same Carbon Credits report. These figures reflect TSMC's ability to capture value from the most complex and lucrative segments of the semiconductor market.

The company's leadership in advanced packaging, particularly its Chip-on-Wafer-on-Substrate (CoWoS) technology, has further cemented its position. CoWoS enables the integration of multiple dies (e.g., GPUs, HBM memory) into a single package, a critical capability for next-generation AI accelerators, according to a Markets Financial Content report. With over 90% of the most cutting-edge AI chips manufactured by TSMC, the company serves as the primary production partner for industry giants like NVIDIA, Apple, and AMD, according to a Markets Financial Content report.

Moderation and Macroeconomic Headwinds

Despite this robust foundation, TSMC's growth has shown early signs of moderation. In October 2025, its revenue grew by 16.9% year-on-year-the lowest rate since February 2024, according to a TechZine report. While this slowdown is concerning, it must be contextualized within broader industry dynamics. For instance, Tesla's strategic shift toward building its own semiconductor infrastructure, as highlighted by analyst Ming-Chi Kuo, signals a potential long-term risk, according to a Times of India report. Elon Musk's stated concerns about TSMC's limited U.S. packaging capacity and geopolitical dependencies could spur competitors to reduce reliance on the Taiwanese giant.

Meanwhile, TSMC faces immediate bottlenecks in its CoWoS packaging capacity, which is currently operating at 60% utilization, according to a TechZine report. This constraint, coupled with a shortage of high-bandwidth memory (HBM), threatens to limit its ability to meet surging demand from clients like NVIDIA and AMD. However, the company is actively expanding its CoWoS capacity, with plans to reach 70,000 wafers per month by late 2025 and 90,000 by 2026, according to a Parameter report. Such investments suggest a commitment to maintaining its leadership in AI manufacturing.

Long-Term Viability: R&D, Diversification, and Geopolitical Strategy

TSMC's long-term prospects hinge on its ability to sustain innovation and adapt to macroeconomic risks. The company's 2nm process, expected to enter mass production in late 2025, promises further advancements in power efficiency and performance, critical for AI workloads, according to a Markets Financial Content report. Additionally, TSMC is diversifying its production footprint to mitigate geopolitical risks. New facilities in the U.S., Japan, and Germany aim to reduce exposure to "Taiwan risk" while aligning revenue and cost bases in the same currency to minimize exchange rate volatility, according to a Times of India report.

However, this diversification comes at a cost. U.S. production, for example, is significantly more expensive due to higher labor and maintenance expenses, according to a Times of India report. Investors must weigh these costs against the potential rewards of securing a dominant position in the AI infrastructure boom. Global AI spending is projected to reach $400 billion by 2026, according to a TechZine report, with TSMC well-positioned to capture a substantial share of this growth.

Balancing the Equation

The key question for investors is whether TSMC's near-term moderation signals a broader slowdown or merely a temporary adjustment in a high-growth sector. While October's 16.9% revenue growth is the lowest since early 2024, according to a TechZine report, it still outperforms the broader semiconductor industry, which has faced cyclical downturns in recent years. Moreover, major tech firms-including Meta, Alphabet, Amazon, and Microsoft-are projected to invest over $400 billion in AI infrastructure in 2025, according to a TechZine report, ensuring sustained demand for TSMC's advanced chips.

The company's pricing power further strengthens its long-term outlook. TSMC's leadership in 3nm and 5nm nodes, combined with its proprietary packaging technologies, allows it to command premium margins, according to a Markets Financial Content report. Even as competitors like Samsung and Intel ramp up their advanced-node capabilities, TSMC's first-mover advantage and ecosystem partnerships provide a formidable barrier to entry.

Conclusion

TSMC's journey through the AI-driven semiconductor revolution is a study in balancing momentum and moderation. While near-term challenges-such as capacity bottlenecks and geopolitical risks-pose headwinds, the company's technical prowess, aggressive R&D investments, and strategic diversification position it as a cornerstone of the AI era. For investors, the critical insight lies in recognizing that TSMC's growth may not be linear but is nonetheless underpinned by structural forces that will define the next decade of technological progress.