TSMC Stock Rises. Outlook Is Bright as the AI Chips Boom Outweighs Tariff Fears.

Taiwan Semiconductor Manufacturing dominates the manufacturing of high-end chips. (Getty Images/Cultura RF)

Taiwan Semiconductor Manufacturing stock rose after the company posted a big jump in profit and sales for its second quarter as robust chip demand for artificial-intelligence applications held up despite currency headwinds and uncertainty about U.S. tariff policy.

TSMC also raised its outlook for the year to 30% revenue growth in U.S. dollar terms, having previously forecast a mid-20% rise.

Its American depositary receipts were up 3.4% in trading Thursday, adding to a 57% gain in the past three months.

The driver for growth is revenue from AI-related chips, which TSMC has previously said it expects to double in 2025 and grow at a mid-40% annual rate for the next five years.

TSMC is the main contract manufacturer for AI chip leader Nvidia. It also makes the core processors inside Apple iPhones, Qualcomm mobile chipsets, and Advanced Micro Devices processors.

“Our business in the second quarter was supported by continued robust AI and HPC [high-performance computing]—related demand,” said Chief Financial Officer Wendell Huang in a statement. “Moving into third quarter 2025, we expect our business to be supported by strong demand for our leading-edge process technologies.”

TSMC reported a second-quarter net profit of 398.27 billion New Taiwan dollars, or $13.53 billion, up 61% from the same period the previous year. That was ahead of analysts’ expectations of NT$372.34 billion.

The company’s quarterly sales grew 39% to NT$933.8 billion. In U.S. dollar terms, revenue climbed 44% to $30.07 billion. TSMC said that for the third quarter it expects revenue of between $31.8 billion and $33.0 billion. The company has been facing currency headwinds when reporting in Taiwanese currency due to relative dollar weakness this year.

One vital question for TSMC is its gross margin, which dipped slightly in the second quarter to 58.6% from 58.8% in the first quarter. It said that in the third quarter it expects a gross margin of between 55.5% and 57.5% due to foreign-exchange effects and lower margins at sites outside Taiwan.

Writing ahead of the earnings report, analysts at Jefferies said they expect TSMC’s gross margin to trend down toward 55%-56%.

So far, TSMC has avoided being subject to any tariffs because the White House has exempted semiconductors, semiconductor manufacturing equipment, PCs, and smartphones from its planned levies. However, the U.S. Department of Commerce is investigating whether tariffs should be imposed on national security grounds.

Chipmaking equipment manufacturer ASML, which sells tools to TSMC, warned on Wednesday that growth in 2026 was no longer guaranteed due to economic and geopolitical uncertainty.

On a conference call after the earnings report, TSMC CEO C.C. Wei said that the AI mega-trend continues to be strong and the company has not seen any changes in customer behavior for the second half of this year. He also said mass chip production at the first plant in Arizona began in the fourth quarter of 2024, and construction of a second plant in that state has now been completed.

Write to Adam Clark at adam.clark@barrons.com and Tae Kim at tae.kim@barrons.com