Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker, saw its shares soar to record highs on Friday, following its strong third-quarter earnings and a bullish outlook driven by the rising demand for artificial intelligence (AI) technologies. However, the company faces potential political hurdles after reports surfaced that it may be under investigation by the U.S. Department of Commerce over its alleged ties with Huawei, the Chinese tech giant.
TSMC shares surged by 6% shortly after trading opened on Friday, reaching T$1,100 ($34.25), surpassing the previous record of T$1,080, set on July 11. This spike gave TSMC a market capitalization of around $884 billion, solidifying its status as the most valuable publicly traded company in Asia. The boost came after TSMC reported better-than-expected third-quarter earnings and provided a favorable revenue forecast, largely fueled by a sharp rise in demand for its advanced AI chips.
The rapid global adoption of AI technology across various industries has provided TSMC with a significant business boost. The company, which counts major players like Apple and Nvidia among its clients, has been at the forefront of manufacturing cutting-edge semiconductor technologies crucial for AI applications.
On Thursday’s earnings call, TSMC announced a 54% increase in quarterly profit, outpacing analyst forecasts. The chipmaker also raised its full-year revenue forecast, predicting continued growth in the near term. CEO C.C. Wei said that TSMC is positioned to experience healthy growth for the next five years, driven by the AI revolution that has swept through industries ranging from healthcare to finance.
“AI is no longer an emerging trend but a foundational pillar of future technological development,” Wei stated. “We see continued robust demand for our advanced chip solutions as more companies embrace AI-driven innovations.”
TSMC’s leading role in the semiconductor industry, particularly in AI chips, gives it a competitive advantage in a market where demand has grown rapidly, as businesses look to incorporate AI into their operations to enhance efficiency and capabilities. AI applications, from machine learning to autonomous driving, rely heavily on TSMC’s advanced chip technology.
TSMC has long been regarded as a global leader in the semiconductor industry, producing chips that power smartphones, computers, data centers, and a growing list of AI-based devices. The company’s dominance in manufacturing high-performance chips has allowed it to secure large orders from top tech firms such as Nvidia, Apple, and AMD.
The rise of AI in industries as diverse as healthcare, automotive, and cloud computing has fueled an insatiable demand for high-performance processors, leading companies to turn to TSMC for the production of their most advanced chips. The company’s 5-nanometer and 3-nanometer processes have become essential for AI-related workloads, especially in data centers that require massive processing power to handle machine learning tasks.
Venson Tsai, an analyst at Cathay Futures Consultant in Taipei, emphasized that the stock’s rise might just be the beginning. “TSMC’s share price hasn’t fully reflected the rising wave of AI long-term,” he said. “As AI adoption accelerates, TSMC will continue to be a major beneficiary, especially as demand for more advanced chip technologies grows.”
Despite TSMC’s remarkable financial performance, political uncertainty looms over the company after a report by U.S. media outlet The Information revealed that the U.S. Department of Commerce is investigating whether TSMC has been supplying AI or smartphone chips to Huawei. Huawei has been the subject of stringent U.S. export controls since 2019, which have severely limited its access to advanced chips not produced domestically in China.
According to the report, U.S. regulators are concerned that TSMC may have violated export control regulations by supplying Huawei with advanced chips used in AI and 5G smartphones. These technologies have been deemed critical to national security by U.S. officials, who have sought to curb China’s technological advancement in these areas. The investigation, if confirmed, could have significant implications for TSMC’s business and its relationship with the U.S. government, a key ally for Taiwan in the face of rising geopolitical tensions with China.
In response to the report, TSMC issued a statement asserting that it is a law-abiding company that adheres strictly to global regulations, including U.S. export controls. The company stressed its commitment to compliance and stated that it would investigate any potential issues, should they arise.
“If we have any reason to believe there are potential issues, we will take prompt action to ensure compliance, including conducting investigations and proactively communicating with relevant parties, including customers and regulatory authorities as necessary,” TSMC said in its statement on Friday.
The U.S. Department of Commerce declined to comment on the investigation, adding a layer of uncertainty to the situation. The potential fallout from the probe could complicate TSMC’s relationship with the U.S. and might lead to further scrutiny of its dealings with Chinese firms.
Huawei, once a dominant player in the global smartphone market and a leader in 5G technologies, has struggled under U.S. sanctions that have cut off its access to key chip technologies. The company has been unable to source the high-performance semiconductors needed for its smartphones and telecommunications equipment from non-Chinese manufacturers since 2019.
The U.S. government has maintained that Huawei’s technologies could be used for espionage purposes by the Chinese government, a claim that both Huawei and Beijing have consistently denied. Despite the denials, the U.S. has taken steps to prevent Huawei from accessing technologies developed or manufactured using U.S. intellectual property, particularly those related to AI and 5G technologies.
For TSMC, which has been caught in the crossfire of the U.S.-China tech war, the stakes are high. While the company has halted shipments to Huawei in compliance with U.S. regulations, the new investigation raises questions about whether some products might have circumvented the restrictions, whether directly or through intermediaries.
TSMC’s prospects appear bright, driven by the rapid growth of AI, cloud computing, and 5G technologies. The company’s ability to innovate and produce chips that meet the increasing demands of these sectors puts it in a strong position to continue dominating the semiconductor industry for years to come.
With the global semiconductor market projected to grow significantly over the next decade, TSMC is poised to play a central role in shaping the future of technology. The company’s investments in expanding its production capacity, particularly in advanced technologies like 3-nanometer and 2-nanometer chips, ensure that it will remain at the cutting edge of semiconductor development.
In addition to AI, TSMC is also betting on the continued expansion of the Internet of Things (IoT), autonomous vehicles, and quantum computing as major growth drivers. These industries, all of which require increasingly powerful and efficient chips, present vast opportunities for TSMC to further cement its leadership in the global semiconductor landscape.
However, the company will need to navigate geopolitical challenges carefully. The ongoing U.S.-China trade war, coupled with potential restrictions on its business dealings with Chinese firms like Huawei, could impact its ability to maintain its current growth trajectory. In addition, TSMC’s reliance on U.S.-based companies like Apple and Nvidia as major customers means that it must balance its relationships carefully to avoid being caught in the middle of global tech disputes.
