Taiwan Semiconductor Manufacturing Company just gave the AI trade a fresh boost.
The chipmaker reported fourth-quarter earnings on Wednesday, blowing past analyst estimates on multiple metrics. It also reported a record 35% quarterly profit, sending TSMC stock soaring as investors cheered the latest indicator that AI demand is still running hot.
The end of 2025 saw rising doubts about the sustainability of the market's top trade, and investor fatigue over relentless AI infrastructure spending. But TSMC's earnings smash and record profit looks to have revived the AI trade as investors get ready for Big Tech earnings in the coming weeks.
TSMC reported that revenue increased 20% on a year-over-year basis in the quarter, while both net income and diluted earnings-per-share surged more than 35%.
"Our business in the fourth quarter was supported by strong demand for our leading-edge process technologies," said TSMC CFO and senior VP Wendell Huang. "Moving into first quarter 2026, we expect our business to be supported by continued strong demand for our leading-edge process technologies."
The company also revealed that its capital spending could rise by as much as 37% to $56 billion this year, and it is expected to rise even more over the coming two years. Analysts had only expected $46 billion for this year.
This news quickly sent AI chip stocks soaring in anticipation of for higher demand. The sector's top premarket moves are as follows:
- Taiwan Semiconductor Manufacturing Company: +5%
- ASML Holding: +7%
- Micron Technology: +3%
- Broadcom: +3%
- Arm Holdings: +3%
- Nvidia: +1.5%
The news proved particularly bullish for ASML stock, which saw its market cap surge past $500 billion on Thursday after TSMC posted its big spending forecast.
The high spending forecast makes it clear that TSMC, considered the market's leader in the AI chip production space, expects demand to remain high not just in 2026 but over the upcoming three year period. As the company is seen as a bellwether for its industry, Wall Street will likely take it as an indicator that the AI trade is as strong as ever.
