TSMC Cashes Out of Arm Stake as 2nm Expansion Takes Center Stage

TSMC sells last Arm Holdings shares for $231M, netting $174M gain, as it reallocates capital to aggressive 2nm capacity expansion amid surging AI demand.

Taiwan Semiconductor Manufacturing Co. has closed the books on one of its most lucrative side bets, selling off the last of its holdings in British chip designer Arm Holdings. The move, executed through subsidiary TSMC Partners over recent days, generated $231 million in proceeds and a direct gain of $174 million for the world’s largest contract chipmaker.

The exit marks the end of a three-year investment journey that began when TSMC joined Arm’s initial public offering as an anchor investor in 2023. After trimming its position in 2024, the company has now fully liquidated the stake. The math tells a compelling story: an original outlay of $100 million has more than tripled.

Analysts see the divestment as a deliberate reallocation of capital rather than any bearish signal on Arm’s prospects. TSMC is in the midst of the most aggressive capacity buildout in its history, with five new factories dedicated to 2-nanometer production slated to begin mass production this year. The first 2nm wafers already rolled off production lines in late 2025, and management has reported defect rates running well below those of previous chip generations.

The semiconductor giant’s financial firepower remains formidable. With a balance sheet carrying negligible debt and a price-to-earnings ratio of roughly 33, TSMC enters this capital-intensive technology transition from a position of strength. The company controls an estimated 70% of the global foundry market.

Advanced Nodes Drive Revenue Dominance

First-quarter 2026 results underscore just how heavily TSMC’s top line now depends on its most cutting-edge manufacturing processes. Combined, 3nm and 5nm technologies accounted for 61% of quarterly revenue — 3nm alone contributed 25%, while 5nm added another 36%.

Total revenue for the quarter reached $35.9 billion, a 40.6% jump from the same period last year. Net income surged 58.3% to NT$572.48 billion, and gross margin hit 66.2% — comfortably ahead of the company’s own guidance.

Management has raised its full-year 2026 growth forecast to more than 30% in U.S. dollar terms, citing what it describes as “extremely robust” demand for AI accelerators. Operating margin is expected to land between 56.5% and 58.5% in the coming quarters.

Stock Pauses After Record Run

The Arm sale coincided with a broader pullback in semiconductor stocks. Arm shares dropped nearly 8% on Tuesday, while TSMC’s New York-listed depositary receipts fell about 3%. On the Taiwan Stock Exchange, TSMC shares slipped 2.21% to NT$2,215 on April 28, dragging the benchmark TAIEX index down roughly 400 points.

Tsai Ming-han of Cathay Futures Consultant Co. characterized the move as a technical correction rather than a reversal of trend. The stock’s valuation, he noted, remains within its historical range. TSMC currently trades at a P/E ratio below 25 — comfortably inside the typical 20-to-30 band. Analysts project earnings per share of around NT$100 for the current year, underpinned by sustained demand from AI and high-performance computing customers.

Goldman Sachs maintains a price target of NT$2,330, while other foreign brokerages have set targets as high as NT$3,030, betting on a ramp-up in advanced packaging capacity.

Arizona Expansion Accelerates

TSMC is also speeding up its U.S. footprint. Mass production at the company’s second Arizona fabrication plant is now expected to begin in the second half of 2027 — a full year ahead of the original timeline. Reports indicate the company has already filed permit applications for a fourth factory and an advanced semiconductor packaging facility on the same site.

Total investment in the U.S. operations has surpassed $65 billion, a clear signal to major American clients including Apple and Nvidia. The accelerated timeline reflects both customer pressure for onshore supply and the strategic importance TSMC places on diversifying its manufacturing base beyond Taiwan.