Taiwan Semiconductor Manufacturing Company (TSMC) reported a significant surge in January revenue, jumping 37% year-over-year to NT$401.3 billion (approximately US$12.7 billion), driven by robust demand for AI-focused chips, particularly for data center applications. This performance exceeded the company's full-year growth forecast of 30%, signaling strong early-year momentum for the semiconductor giant.
The revenue gains were heavily concentrated in TSMC's most advanced offerings. Chips manufactured using 7-nanometer processes or smaller accounted for 77% of total wafer revenue in Q4 2025, with the cutting-edge 3-nanometer process alone contributing 28%. High-performance computing (HPC) platforms, which include AI data center accelerators, were the primary growth driver. In 2025, HPC revenue climbed 48% year-over-year and represented 58% of TSMC's total revenue, while its smartphone-focused business saw only an 11% increase.
Adding to the bullish outlook, NVIDIA CEO Jensen Huang stated that TSMC would likely need to double its manufacturing capacity to keep pace with the surging demand for AI chips. This signals sustained order flow for years to come but also implies a multi-year period of heavy capital investment.
In response to this demand, TSMC is planning up to US$56 billion in capital expenditure for 2026, a 25% increase from 2025. This investment is aimed at supporting data center demand and expanding production capacity for AI-focused chips. This aligns with massive infrastructure spending by major tech firms; Amazon, Alphabet, Meta, and Microsoft are projected to invest roughly $650 billion into AI-capable data centers in 2026 alone.
Investor sentiment received a further boost from U.S. policy developments. U.S. officials announced plans to carve out Big Tech chips from the next round of tariffs, with exemptions tied to TSMC's U.S. investment commitments. This reduces tariff exposure for TSMC's largest customers, including Apple and NVIDIA, removing a cloud of uncertainty.
Despite the optimism, analysts caution about sustainability. The semiconductor market remains cyclical, and the pace of AI adoption and capital-intensive spending by tech giants could affect future earnings. Furthermore, TSMC faces geopolitical headwinds as Taiwanese officials pushed back on U.S. demands to shift 40% of chip production stateside, creating potential friction around the company's Arizona expansion plans.
Financially, TSMC also raised its quarterly dividend to $0.9678 per share, up from $0.83. Wall Street remains bullish, with an average analyst price target of $381.67, implying upside from recent trading levels around $355.
