Taiwan Semiconductor Manufacturing (TSM.US) reported a 53.3% year-over-year surge in August monthly sales, as the company races to meet overwhelming demand driven by global AI infrastructure buildouts amid persistently tight supply conditions. August revenue reached NT$514.8 billion (approximately $16.3 billion), surpassing the average analyst expectation of 46.8% sales growth for the current quarter.
The key chip foundry for Nvidia and Apple has recently indicated that even with unprecedented factory construction speed, it still cannot keep pace with demand. Cliff Hou, Deputy Chief Operating Officer at TSMC, noted this month that the company is attempting to build and equip approximately 20 fabrication plants across Taiwan and overseas, compared to the typical four to five new projects it would simultaneously undertake in the past. "The current pace is nearly four to five times faster than before, we are trying to catch up, but still cannot satisfy demand," Hou stated, adding that the company's demand for chipmaking equipment has nearly doubled since late last year.
TSMC will also need to allocate significantly more capital toward upgrading its equipment. The company recently reached an agreement with ASML to adopt the Dutch firm's advanced High-NA EUV lithography machines for mass production starting in 2030. This marks a shift from TSMC's earlier stance, where it repeatedly cited cost concerns — with individual machines priced up to $400 million — as a reason to delay deployment of ASML's most cutting-edge systems.
Analyst Charles Shum suggests that market consensus may be underestimating the potential for TSMC's margin resilience in 2027. Current market expectations project 35% revenue growth and 31% earnings growth for 2027, implying a gross margin of 65.5%, compared to 66.4% in 2026. This compression reflects known headwinds: TSMC has guided that its 2-nanometer process and overseas fab expansion will each dilute gross margins by 3 to 4 percentage points, while depreciation costs rise alongside a capital expenditure budget exceeding $60 billion. However, pricing power should partially offset these drags, as some price increases originally slated for the second half of 2026 have been deferred to the first quarter of 2027.
In July, TSMC raised its full-year spending and revenue forecasts, reflecting confidence that robust AI chip demand will extend through 2027 and beyond. The company expects capital expenditure to reach a record $60 billion to $64 billion in 2026 and projects full-year sales growth of slightly above 40% in U.S. dollar terms. The company's stock has climbed approximately 60% since the start of the year.
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