TSMC's Balancing Act: Record Earnings and Sky-High Demand Collide With Costly Tech and Expansion Hurdles

TSMC reports 46.4% net profit surge amid AI demand, but CEO warns of supply chain bottlenecks, expensive ASML lithography tools, and slow US expansion.

TSMC posted another stellar set of financials, but the conversation at its latest shareholder meeting was less about past triumphs and more about the logistics of keeping the AI boom aloft. Net profit surged 46.4% to 1.717 trillion New Taiwan dollars on revenue of 3.809 trillion NT$, a 31.6% jump from the prior year. Earnings per share rose to 66.25 NT$, up from 45.25 NT$, while the annual dividend climbed to 18.0 NT$ per share versus 14.0 NT$ a year earlier.

But the company is wrestling with a classic success problem: customers want more chips than the supply chain can comfortably deliver. At the meeting in Hsinchu, chief executive C.C. Wei made it clear the bottleneck is not on the demand side. AI models are finding their way into consumer gadgets, corporate systems, and government projects, keeping orders flowing for advanced semiconductors and computing power. The choke point, he said, lies in capacity, component suppliers, and upstream partners.

That capacity squeeze is now front and center for investors. The stock dipped 2.77% on Thursday to €368.50, though it remains 34.98% higher year-to-date and up 107.72% over the past twelve months. From its 52-week peak of €389.50, the share is off 5.39% — a modest pullback in a run that has made TSMC one of the most valuable companies in Asia.

The €400 Million Question

One of the biggest wild cards in TSMC's growth trajectory is the next generation of lithography equipment from ASML. Wei confirmed the company has purchased High-NA EUV machines and is using them for research and development. But mass production is not on the near-term horizon. The price tag is still "a bit high," as Wei put it: a single tool can cost up to $400 million.

That figure is no trivial detail. TSMC's ability to stay ahead of competitors in AI accelerators, high-performance computing, and advanced chip packaging depends on being able to adopt cutting-edge manufacturing processes without crushing margins. Wei indicated the company will wait until costs come down and the benefits are fully demonstrated before bringing High-NA into volume production. Until then, R&D is the right place for such expensive kit.

Arizona Ambitions Hit the Brakes

TSMC's expansion in the United States remains a work in progress. The company is pouring $165 billion into new facilities in Arizona, and Wei said the two plots of land there should be sufficient for the next decade. But he warned that fully serving American customers from US production will take "a very long time." The earlier goal of locating 30% of capacity for 2-nanometer and smaller nodes in the US is looking increasingly difficult to achieve.

Environmental permits and a shortage of construction workers were cited as the main bottlenecks. The gap between political aspirations for domestic chip making and the industrial reality on the ground is stark. Taiwan, Wei reiterated, remains the most efficient base for manufacturing, housing core research, the deepest talent pool, and the largest production footprint.

Governance Gets a Tune?Up

While capacity and costs dominate the operational narrative, the 2026 shareholder meeting agenda revealed a quieter but equally significant shift: the corporate governance framework is being updated to match TSMC's sprawling global footprint. The board proposed amending Article 19 of the company's charter to allow between nine and twelve directors, up from the current range of seven to ten. More directors with diverse backgrounds are needed, the company said, as the business becomes increasingly complex.

That complexity is plain to see. TSMC is simultaneously building 2?nanometer fabs in Hsinchu and Kaohsiung, expanding advanced packaging lines, breaking ground on a specialty chip plant in Dresden, and planning a second 3?nanometer facility in Kumamoto. The capital demands are immense and the geographic spread is unprecedented.

Another item on the agenda was an update to asset sales rules, driven by new directives from Taiwan's financial regulator. For companies with paid?in capital exceeding 50 billion NT$, the disclosure threshold for certain assets will shift from a fixed 1 billion NT$ to a percentage of capital — 5%. For a capital?intensive chipmaker, that change is more than administration: it directly tracks the current investment cycle in leading?edge fabrication, advanced packaging, and overseas capacity.

Dividends and the Next Test

For shareholders, the reward has been a steady dividend increase. The 2025 total of 18.0 NT$ per share represents a 28.6% jump over the previous year's 14.0 NT$. The stock now trades at €379.00, just 2.7% below its 52-week high, with a relative strength index of 67.3 — strong but not yet overbought.

The twin messages from the meeting are clear: TSMC's financial engine is firing on all cylinders, and the AI demand wave shows no sign of cresting. Yet the company's ability to translate that demand into profitable output hinges on three things — scaling new capacity fast enough, driving down the cost of next-gen lithography, and building out Arizona without eroding margins. For now, the market is betting on execution. The next real test will be whether the chip giant can turn its record numbers into an equally impressive delivery record.