TSMC's second-quarter profit soars nearly 61%, beating estimates as AI chip demand stays strong

Taiwan Semiconductor Manufacturing Company on Thursday reported a near 61% year-on-year rise in second-quarter profit, beating estimates, as demand for artificial intelligence chips stays strong.

Here are TSMC's first-quarter results versus LSEG SmartEstimates:

• Revenue: 933.80 billion new Taiwan dollars ($31.7 billion), vs. NT$931.24 billion expected
• Net income: NT$398.27 billion, vs. NT$377.86 billion

Second-quarter net profit hit a record high, according to Reuters.

TSMC's net revenue in the June quarter rose 38.65% from a year ago to NT$933.80 billion, also beating estimates.

TSMC, the world's largest contract chip manufacturer, has benefited from the megatrend towards artificial intelligence as it manufactures advanced AI processors for clients including Nvidia and Apple.

"The primary driver of growth for TSMC has been the robust demand for AI related chips, particularly for the leading edges nodes below 7nm," said Brady Wang, associate director at Counterpoint Research.

In semiconductor technology, smaller nanometer sizes signify more compact transistor designs, which lead to greater processing power and efficiency. TSMC said advanced chips, with sizes 7-nanometer or smaller, accounted for 74% of TSMC's total wafer revenue in the quarter.

"Surging demand from the AI boom is highly sustainable in the near term, with AI still in its very beginning stages and continues to expand across industries," Wang added.

However, the company faces potential headwinds from the trade policy of the U.S. President Donald Trump, who has threatened steep "reciprocal tariffs" on Taiwan.

Taiwan faces 32% tariffs announced in April and is in the midst of trade talks with the U.S., according to local media reports. Trump earlier this month also warned of potential additional tariffs on semiconductors.

U.S. export controls have also restricted TSMC's business with China, as well that of its key clients such as Nvidia and AMD. However, amid a thawing of trade relations between Beijing and Washington, Nvidia and AMD said earlier this week that they had received government assurances allowing them to ship products to China.

Other headwinds facing TSMC in the second half of the year include appreciation of the Taiwan dollar and potential order cuts from smartphone and PC clients due to global macro conditions, said Sravan Kundojjala, an analyst at SemiAnalysis specializing in global foundries.

Taiwan-listed shares of TSMC have risen about 5% so far this year.