Fab Results

Chip Titan TSMC Reaps Record Profits

The world’s biggest chipmaker has smashed earnings forecasts again, posting its best-ever quarterly profits. Taiwan Semiconductor Manufacturing Co. (TSMC for short) is quietly powering the entire AI boom.

TSMC who? This is the company that makes chips for most big names, including Nvidia and Apple. TSMC has about 90% market share on advanced 3-nanometer chips and around 70% slice of the overall contract chip-making market.

This makes it one of the most crucial links in the global economy.

Blockbuster Numbers for Chipmaker

• TSMC’s Q4 net profit jumped 35% year-on-year to $16 billion, the seventh quarter in a row with double-digit growth.
• Analysts only expected $15.2 billion.
• Revenue surged 21% to $33.7 billion.
• Guidance: Expects 2026 revenue to rise 30%.

Key line from CEO C.C. Wei on the possible AI bubble: "We're also very nervous about it. We're investing $52-$56 billion in capex. If we did not do it carefully, that would be a disaster for TSMC for sure."

Learn Your Chip Lingo

Without TSMC’s fabrication plants or fabs, Nvidia’s GPUs are just design notes. A fab is where microchips are physically made. It’s an ultra-clean, multi-billion-dollar facility filled with machines that etch microscopic circuits onto silicon wafers.

• Chip designers (Nvidia, Apple, AMD) dream up the chips.
• Foundries (TSMC) actually manufacture them, and sell them in wafers (each to be cut into dozens or hundreds of chips) to the likes of Nvidia.
• Toolmakers (ASML) build intricate lithography machines used by TSMC.

In short: designers imagine, fabs materialise.

Why Nvidia Is More Valuable than TSMC

TSMC is the most valuable company in Asia, with a $1.7 trillion market cap. But its two main customers, Nvidia and Apple, dwarf it at $4.5 trillion and $3.8 trillion. Why?

• Brain Power: Nvidia makes the "secret sauce" (AI blueprints and software) that makes chips smart. TSMC follows the instructions.
• Scalability: TSMC has to spend billions on factories whenever it wants to expand.
• Margins: Nvidia captures gross margins as high as 74%. TSMC’s is high too at 62%, but designers still reap better rewards.
• Safety: Nvidia is a US company. TSMC is based in Taiwan, and investors worry about political tension there.

TSMC is slowly raising prices to get its fair share, but it still can't charge designer prices for a builder’s job.

Hot Chips, Cold Risks

TSMC is riding high, but it has vulnerabilities investors should look out for:

• Geopolitics: The US–China trade conflict has thawed slightly, but China is still blocked from buying the best chips on the market.
• Home risk: Based in Taiwan, TSMC always risks being swept away by a conflict in the region. It’s hedging bets with a $165 billion push to build factories in the US.
• Over-investment risk: if AI demand cools, new fabs could sit half-empty.
• Customer concentration: Relies on big clients like Apple and Nvidia

What This Means for You

Earnings from a single company often tell a wider sector story. TSMC is a barometer for the whole AI economy.

That’s why its strong results sent Dutch ASML’s shares over 6% higher on Thursday — similar to TSMC’s own share price move in the US pre-market trading. Other chip companies were also up.

• The AI boom isn’t just about chatbots. Hardware infrastructure underpins it all.
• When demand for chips rises, suppliers, equipment makers, and designers all benefit.
• But beware: sky-high expectations are priced in. Even a small slowdown could send shares tumbling for the whole sector.