Taiwan Semiconductor Manufacturing Co Ltd (NYSE:TSM), the world’s main producer of advanced AI chips, stock fell 2.32% (As on July 18, 11:15:31 AM UTC-4, Source: Google Finance) after the company posted a 60 per cent jump in second-quarter profit to record levels that handily beat market forecasts, though US tariffs and a strong Taiwan dollar could weigh on its outlook. TSMC announced plans for a $100 billion US investment with Trump at the White House in March, on top of $65 billion pledged for three plants in the state of Arizona, one of which is up and running. Taiwan Semiconductor Manufacturing Co said net profit for April-June climbed to T$398.3 billion ($13.53 billion), its fifth straight quarter of double-digit growth. That was well ahead of a T$377.9 billion LSEG SmartEstimate. Chips are essential for generative AI, which has exploded in recent years and transformed the global economy, and demand for them was expected to remain “robust”.

Hsinchu, Taiwan-based TSM reported earnings per share (EPS) of NT$15.36 ($2.47 per ADR) for the second quarter of the fiscal year 2025. This marked a 60.7% year-over-year (YoY) increase and a 10.2% sequential climb. Net revenue also surged by over 44% YoY and nearly 18% from the previous quarter to $30.07 billion, exceeding the $28.4 billion to $29.2 billion guidance range provided by the company in April. In Taiwanese dollar terms, the growth is 39% and 11%, respectively. Among end markets, the high-performance computing (HPC) segment contributed 60% of the total revenue, smartphones 27%, and IoT and automotive 5% each. The fastest sequential growth (30%) was observed in Digital Consumer Electronics (DCE), which accounted for only 1% of the total revenue. HPC and IoT grew 14% each, and smartphones a more modest 7%.

Moreover, Gross margin rose 5.4 points YoY but edged down 0.2 points quarter-over-quarter (Q-o-Q) to 58.6%, aligning with the 57%-59% guidance. Operating and net margins for the quarter were at 49.6% and 42.7%, respectively. TSMC said shipments of its 3-nanometer (nm) chips accounted for 24% of the total wafer revenue, while the contributions from the 5-nm and 7-nm processes were 36% and 14%, respectively. These processor node technologies, designated as advanced, accounted for 74% of the total wafer revenue. Second-quarter total capital expenditures (capex) were $9.63 billion.

Looking ahead, the company guided to third-quarter net revenue of $31.8 billion to $33 billion versus the Koyfin-compiled $31.84-billion consensus estimate. Gross and operating margins are seen at 55.5%-57.5%, and 45.5%-47.5%, respectively.