TSMC’s Q2 2025 earnings report delivered a masterclass in semiconductor dominance, with record revenues of $31.93 billion—up 39% year-over-year—driven by the AI revolution. Yet beneath the headline numbers, the company faces a storm of geopolitical and financial headwinds, from U.S. tariffs to a strengthening New Taiwan dollar. Is TSMC’s moat wide enough to weather these challenges? Let’s dive in.
The AI Surge: TSMC’s Growth Engine
The numbers scream opportunity. High-Performance Computing (HPC) revenue, fueled by AI chips, now accounts for 59% of TSMC’s total sales, with advanced nodes (≤7nm) contributing 73% of revenue. The company’s CoWoS packaging—a critical enabler for AI accelerators—has become the gold standard for hyperscalers like NVIDIA and AMD. TSMC isn’t just keeping up with the AI boom; it’s the linchpin of it.
But here’s the catch: this growth comes at a cost. The company’s Q2 gross margin dipped slightly due to a 7% appreciation of the New Taiwan dollar against the U.S. dollar, a headwind that could compress margins by 3 percentage points without hedging. Meanwhile, U.S. tariffs—looming from Trump-era threats—threaten to disrupt supply chains unless mitigated.
Tariff Tempests and the U.S. Gambit
TSMC’s $165 billion U.S. expansion—$65 billion already committed to Arizona, with another $100 billion in the works—isn’t just about growth. It’s a geopolitical insurance policy. By deepening its U.S. footprint, TSMC aims to qualify for tariff exemptions and align with Washington’s “friend-shoring” agenda. CEO C.C. Wei’s comments in June made this clear: tariffs “impact TSMC, but not directly” because the company is “finalizing a trade deal” to secure exemptions.
Yet the costs are real. U.S. factories are 20-30% costlier to build than in Taiwan, and the NTD’s 12% annual rise adds further pressure. TSMC’s answer? Lean into premium pricing for advanced nodes (3nm, 5nm) and scale CoWoS capacity. The company’s Q2 results show it’s succeeding: AI-related revenue is on track to double in 2025, and 3nm node sales surged 12% sequentially.
Why Hold TSMC Despite the Storm?
The skeptics will argue: forex, tariffs, and $100 billion in U.S. factories are too much to stomach. But here’s why TSMC remains a must-own semiconductor stock:
No Substitute for Leadership: TSMC’s 3nm and upcoming 2nm nodes are light-years ahead of peers. Intel’s 20A process? Not yet commercially viable. Samsung’s foundry? Still catching up. AI’s Insatiable Appetite: The global AI infrastructure spend is projected to hit $100 billion annually by 2027, and TSMC’s CoWoS packaging is irreplaceable for high-density AI chips. Margin Resilience: Despite forex headwinds, TSMC kept Q2 gross margins within its 57-59% guidance. Its hedging strategies and cost discipline suggest it can weather volatility.
The Bottom Line
TSMC’s Q2 results aren’t just about today—they’re about owning the future. The company’s $114 billion full-year revenue target (a 30% jump from 2024) and its AI-driven moat make it a core holding for investors willing to look past near-term noise. Yes, tariffs and forex are risks, but they’re offset by TSMC’s unmatched tech leadership and the secular AI tailwind.
For now, hold TSMC. Dip buyers should wait for corrections—say, a 5% pullback—to add to positions. The AI supercycle isn’t slowing down, and neither is TSMC.
Data as of July 14, 2025. Past performance does not guarantee future results.
