Taiwan Semiconductor Manufacturing (TSMC) anticipates its capital expenditure will surge to $56 billion by 2026, surpassing market expectations and highlighting its strong confidence in the sustainability of the global AI boom. The company also forecasts its 2026 revenue growth will approach 30%, higher than the average analyst estimate. On the 15th, TSMC's Chairman and CEO, C.C. Wei, and CFO Wendell Huang held an earnings call for Q4 2025. TSMC revealed that its 2026 capital expenditure plan could reach a high of $56 billion, a substantial 37% increase from the actual expenditure of $40.9 billion in 2025, setting a new record high for the company. This unprecedented level of investment underscores the world's largest chip foundry is accelerating its capacity expansion to meet the robust demand for artificial intelligence chips. The company's first-quarter earnings guidance, released simultaneously, also exceeded market expectations. TSMC projects current-quarter revenue to be between $34.6 billion and $35.8 billion, surpassing the Bloomberg consensus estimate of $33.22 billion. Guidance for gross profit margin and operating profit margin also significantly outperformed analyst expectations, coming in at 63%-65% and 54%-56% respectively, far above market projections of 59.6% and 49.7%. Management stated:
"Capital expenditure will increase significantly over the next three years. Achieving a long-term gross margin of 56% and above is achievable. ... Capacity is very tight."
The substantial increase in capital expenditure, a key barometer for the AI fervor, sends a positive signal about the ongoing AI development frenzy, a trend that has consistently underpinned demand for Nvidia's accelerators. This outlook may help alleviate market concerns regarding the sustainability of data center spending by tech giants like Meta and Amazon. Nvidia CEO Jensen Huang reiterated this month that demand for AI accelerators remains strong. AMD CEO Lisa Su expressed a similar view, anticipating another surge in demand for more AI computing power and user numbers. Planned expenditures for building and filling data centers with AI chips have exceeded $1 trillion, helping TSMC achieve annual sales growth of over 30% for the past two years. Q4 2025 earnings showed TSMC's net profit reached NT$505.7 billion, a 35% year-on-year increase, beating market expectations of NT$467 billion. The gross profit margin improved to 62.3% from 59.5% last quarter, while the operating profit margin jumped to 54% from 50.6%, both exceeding analyst forecasts. This series of strong figures reflects the persistently high demand for AI chips, granting TSMC considerable pricing power and profitability. Investors will be closely watching whether this expansion cycle can continue to support its valuation levels.
The severe memory chip supply shortage that emerged in 2025 could pose challenges for TSMC's broader business. Manufacturers are prioritizing the production of high-end, high-bandwidth memory used with chips from Nvidia and AMD, forcing consumer electronics makers to raise prices. Industry observers like IDC have already lowered their 2026 shipment forecasts. TSMC still relies heavily on business from Apple's iPhone and smartphones using Qualcomm's advanced processors. According to Bloomberg, there is a general market expectation that the memory shortage will impact 2026 mobile device sales, with Macquarie Capital forecasting smartphone sales to decline by 11.6% year-on-year. More updates to follow...
Comments