TSMC's Blowout Quarter Fails to Shield It From the AI Spending Jitters

TSMC shares slipped 2.5% in yesterday's session, caught in a technology-wide retreat that had less to do with the chipmaker's own results than with mounting doubts over how long the artificial intelligence investment boom can run. Rising bond yields added to the gloom, while foreign investors pulled money out of Taiwanese chip and hardware names. The trigger, according to the Taipei Times, was a combination of unexpectedly hot US inflation data and fears of higher interest rates ahead.

The selloff came just a day after TSMC delivered third-quarter 2026 numbers that would ordinarily have been cause for celebration. Revenue for the period reached NT$1,494.24 billion, equal to US$46.72 billion — a 41.2% jump on the year-earlier quarter. Net profit climbed even faster, hitting NT$763.06 billion, up 68.7% year over year. In other words, the earnings momentum and the share-price weakness are pulling in opposite directions, and that gap is the real story.

Two Analysts, Two Votes of Confidence

Wall Street's response to the results was unambiguous. Barclays analyst Simon Coles lifted his price target on TSMC from $665 to $670 yesterday while keeping an "Overweight" rating. The bump was modest — more a reaffirmation of an existing view than a fresh re-rating — but its direction stood in sharp contrast to the market's mood. Needham's Charles Shi had moved a day earlier, raising his target to $560 and maintaining a buy recommendation.

Those calls sketch out a constructive case for the stock even as trading desks were busy selling. What they cannot do is insulate TSMC from a sector-wide reassessment of AI spending, which is precisely what drove the tape yesterday.

Guidance Becomes the Real Scorecard

With the quarter now in the books, attention shifts to what comes next. TSMC guided fourth-quarter 2026 revenue to a range of US$52.3–54.3 billion, giving investors a concrete yardstick against which to measure the durability of demand. The company also reaffirmed capital expenditure of US$60–64 billion for 2026 — a figure that speaks directly to whether TSMC can back up its growth with enough production capacity.

Those expansion plans are already detailed. Annual capacity for the N2 family is set to more than double in 2027, and a further fab in Tainan is slated to begin mass production of 3-nanometer chips in the first half of 2028. TSMC also said CoWoS remains customers' preferred route for advanced chip packaging, meaning the buildout extends well beyond wafer fabrication itself.

Texas Talks, but No Commitment

Geographic expansion is still under review. TSMC has signaled openness to working with Elon Musk's planned Terafab project, though CEO C.C. Wei made clear that any potential fab in Texas would have to be operated by TSMC itself. No investment has been approved, and the discussion remains exploratory.

For now, the next hard data point arrives on 10.11.2026, when TSMC publishes its October revenue figures. Until then, the company's growth expectations and the market's skepticism about the staying power of the AI capex cycle will keep pulling against each other — a tension that even a 68.7% profit surge and a fresh price-target hike could not resolve in a single session.