Taiwan Semiconductor Manufacturing Co. (TSMC) showed a very strong 39% revenue growth for the first two months of 2025, reinforcing demand for Nvidia Corp. AI chips.
Combined revenue for January and February came to a total of $553.3 billion ($16.8 billion), a clear acceleration from the stellar 34% growth it achieved in 2024. Analysts expect TSMC’s revenue to rise 41% this quarter, cementing its position as the bellwether for the broader semiconductor industry.
Investors and industry experts closely follow TSMC’s performance as the world’s largest supplier of advanced AI chips, assessing the long-term feasibility of the AI-driven boom. Although Nvidia’s critical role in AI-powered computing has made it the world’s most valuable company, skepticism has been mounting recently about whether the investment frenzy around artificial intelligence can endure.
Recently, China’s DeepSeek introduced a more bankable method of developing AI, which could represent a bottom-up shakeup of the market.
Broader tech industry shows resilience in AI spending
While tech company shares tumble over fears of AI market saturation, tech giants still have no qualms about allocating funds to AI-related ventures.
Broadcom Inc. on Thursday eased investor fears by asserting that spending on AI computing infrastructure remains strong.
Taiwanese electronics giant Hon Hai Precision Industry Co. also reported a 25% increase in revenue in the first two months of 2025, exceeding last year’s growth rate and highlighting the ongoing strength in the tech supply chain.
This broad-based industry robustness implies that AI demand continues to spur a meaningful rhythm of capital expenditures, especially in semiconductor manufacturing and high-performance computing.
However, with economic fortunes changing and geopolitical uncertainties, the sustainability of such investments remains unclear. TSMC’s top uncertainty in 2025 is whether the US will impose tariffs on chip imports.
There is no official policy, but uncertainty surrounding new trade restrictions is motivating strategic shifts in the industry. Analysts say that could help explain TSMC’s recent surge in revenue, which may be partially a result of stockpiling ahead of possible US trade action.
And with a canny bit of timing, TSMC’s chief executive visited the president at the White House last week to announce a $100 billion investment in American manufacturing, the largest investment of its kind by a foreign company.
Much of this is a deterrent to retaliatory tariffs and another means of locking TSMC into the American semiconductor ecosystem.
However, it has also stoked fears about what this means for Taiwan’s semiconductor sector, as such a commitment may signal a gradual shift of high-end manufacturing capabilities from the island.
Defunding the CHIPS Act would affect the TSMC in the long run
TSMC is well-capitalized even with massive investment commitments. Its record-high net cash balance of $44 billion enables it to undertake high-cost projects without impacting credit ratings.
However, the investment could have future consequences for its bottom line, especially if the US government reverses its subsidization of semiconductor production.
Trump has also requested funding cuts to the CHIPS Act, a US government program to stimulate domestic semiconductor logging production. If that funding is withheld, TSMC’s US expansion business model or break-even point could advance, pressuring profit margins.
TSMC has a linchpin role in the semiconductor supply chain, which will only become more relevant as AI adoption expands across industries. The company’s continued dominance will depend on how it navigates geopolitical uncertainties, fickle regulatory regimes, and changing competitors.
At least, the next phase of growth may require cost-effective approaches to chip production and tech development, no surprise given the stiff competition in the AI space, which shows no immediate signs of slowing.
Cryptopolitan Academy: Coming Soon - A New Way to Earn Passive Income with DeFi in 2025. Learn More
