TSMC’s latest earnings report showed profits soaring nearly 70%. So why did its stock fall? $TSM
TSMC just released its third-quarter earnings: revenue topped NT$1.49 trillion, while net profit surged to NT$763.1 billion, up nearly 69% year over year. Every key metric beat market expectations. The 2nm and other advanced-process technologies made up a significant share, and demand for AI chips remains robust.
The interesting thing is that the market dipped slightly after the strong results were announced. Investors aren’t worried that TSMC can’t make money; they’re starting to question its hugely ambitious capital spending plans.
This year, TSMC’s capital expenditure is set to hit $64 billion, and in the next few years it could climb to the astronomical figure of around $80 billion.
With nearly 20 factories being built around the world at once, this unprecedented pace of expansion means extremely high depreciation costs and management overhead from overseas facilities. Gross margin guidance was also adjusted slightly, prompting the market to grow wary of overcapacity and diminishing returns on AI investment.
In the short term, the TSMC story is about its monopoly premium—no one can replace it. But over the medium to long term, the focus will shift from the AI boom to absorbing capacity. Once the tech giants move into a more disciplined, finely calculated phase of AI investment, enormous capital spending could become a double-edged sword.
The results are at a peak, but the warning bells are ringing over its breakneck expansion.
DYOR
TSMC just released its third-quarter earnings: revenue topped NT$1.49 trillion, while net profit surged to NT$763.1 billion, up nearly 69% year over year. Every key metric beat market expectations. The 2nm and other advanced-process technologies made up a significant share, and demand for AI chips remains robust.
The interesting thing is that the market dipped slightly after the strong results were announced. Investors aren’t worried that TSMC can’t make money; they’re starting to question its hugely ambitious capital spending plans.
This year, TSMC’s capital expenditure is set to hit $64 billion, and in the next few years it could climb to the astronomical figure of around $80 billion.
With nearly 20 factories being built around the world at once, this unprecedented pace of expansion means extremely high depreciation costs and management overhead from overseas facilities. Gross margin guidance was also adjusted slightly, prompting the market to grow wary of overcapacity and diminishing returns on AI investment.
In the short term, the TSMC story is about its monopoly premium—no one can replace it. But over the medium to long term, the focus will shift from the AI boom to absorbing capacity. Once the tech giants move into a more disciplined, finely calculated phase of AI investment, enormous capital spending could become a double-edged sword.
The results are at a peak, but the warning bells are ringing over its breakneck expansion.
DYOR