TSMC Reports Record Q2 Profit Driven by AI Demand, Cautions on Tariff Risks

Taiwan Semiconductor Manufacturing Co. (TWSE: 2330), the world’s leading producer of advanced AI chips, reported a net profit of T$398.3 billion (approximately $13.5 billion USD) for the second quarter ending in June 2025, a 60.7% increase from the same period last year. This marks the company’s fifth consecutive quarter of double-digit growth and surpassed market expectations, which were pegged at T$377.9 billion, according to LSEG SmartEstimate data.

TSMC attributed its strong performance primarily to growing global demand for artificial intelligence. CEO C.C. Wei stated that AI momentum continues to accelerate, and that the company anticipates another substantial revenue jump in the third quarter.

Among key developments, TSMC noted that Nvidia, one of its primary clients, recently resumed sales of its H20 AI chip to China following U.S. regulatory approval. Wei described this as “very positive news,” both for Nvidia and for TSMC, given China’s significance as a market.

However, despite these optimistic near-term projections, TSMC expressed caution regarding its fourth-quarter outlook. The company cited potential risks from impending U.S. tariffs and other macroeconomic uncertainties. While there has been no immediate change in customer behavior, Wei acknowledged the company is preparing for possible impacts.

Currency headwinds also pose a challenge. The New Taiwan dollar has appreciated by roughly 12% against the U.S. dollar this year, which is expected to pressure profit margins. TSMC projects its third-quarter gross margin will range between 55.5% and 57.5%, compared to 58.6% in the second quarter.

Capital expenditures remain a priority, with the company reaffirming its annual spending target of $38 billion to $42 billion. TSMC continues to ramp up investment in overseas fabrication facilities, including a planned $100 billion commitment in the U.S. and an additional $65 billion dedicated to three semiconductor plants in Arizona. One of these is currently operational.

Still, geopolitical risks loom. Former U.S. President Donald Trump has signaled the possibility of tariffs targeting semiconductors, and Taiwan has been warned of a potential 32% reciprocal tariff rate, although no final figures have been officially issued.

Another variable affecting TSMC’s outlook is Apple, one of its major clients. Weakening Apple sales in China could drag on fourth-quarter performance, especially with new product launches typically occurring during that period. Allen Huang, VP at Mega International Securities Investment Services in Taiwan, pointed to Apple's slower momentum in the Chinese market as a possible factor behind TSMC’s cautious tone.

TSMC shares, which soared by approximately 80% in 2024, have gained only around 5% year-to-date in 2025, reflecting investor concern over tariff risks and currency volatility.