Taiwan Semiconductor Manufacturing Co. Ltd. plans to raise chip manufacturing prices by 5% to 10% in 2027 to offset higher costs for materials, equipment, and capacity expansion driven by artificial intelligence demand. The proposed increase follows a report by Bloomberg, citing Nikkei, indicating the company will delay implementation until 2027 to allow customers time to adjust. Taiwan Semiconductor stock climbed nearly 4% in Tuesday’s premarket session, supported by a 1.37% rise in Nasdaq futures and a 0.57% gain in S&P 500 futures.

CEO C.C. Wei reiterated that the pricing strategy is “strategic, not opportunistic,” as the company continues investing heavily in new manufacturing capacity. This includes a $265 billion Arizona expansion. The early gain reflects renewed buying interest in large-cap chipmakers as investors rotate back into growth stocks, viewing the recent pullback as a buying opportunity rather than a broader reversal.

Technical Indicators and Analyst Outlook

Taiwan Semiconductor trades about 18.6% above its 200-day simple moving average and 6.1% above its 100-day average, maintaining a positive long-term trend. However, the stock remains 3.8% below its 20-day moving average and 1.8% below its 50-day moving average. The moving-average structure is bullish, with the 20-day average above the 50-day average, and the 50-day average above the 200-day average. Key resistance sits near $450, while support is around $405.50.

The stock carries a consensus Buy rating with an average analyst price forecast of $543.33. Recent analyst actions include DA Davidson reiterating Buy and raising its price forecast to $500, TD Cowen maintaining Hold with a lifted price forecast of $440, and Barclays maintaining Overweight with an increased price forecast of $650.

Recent Analyst Actions

Taiwan Semiconductor represents a significant holding in several exchange-traded funds, including Harbor International Compounders ETF, iShares International Dividend Active ETF, and Pacific NoS Global EM Equity Active ETF. Shares were up 3.68% at $417.11 during premarket trading on Tuesday.

Taiwan Semiconductor Manufacturing Co Ltd. reported a second-quarter net profit of NT$706.56 billion, representing a 77.4% surge from the previous year, driven by unrelenting demand for artificial intelligence chips. The world's largest contract chipmaker posted revenue of $40.2 billion, climbing 36% year-over-year, while gross margin rose to 67.7% and operating margin reached 60.3%. Despite the record earnings, shares fell roughly 4.6% in the premarket session and are down 15% in July, marking the stock's worst month since September 2022, as investors reacted to an aggressive capital-spending ramp and volatility in the semiconductor sector.

Financial Performance

Wendell Huang, Senior VP and Chief Financial Officer, attributed the margin expansion to stronger cost performance and higher factory utilization, partially offset by overseas fabrication plants. Taiwan Semiconductor generated 783 billion New Taiwan dollars in operating cash flow during the quarter. The company spent 496 billion New Taiwan dollars, or about $15.7 billion, on capital expenditures and ended the quarter with 3.5 trillion New Taiwan dollars, or about $110 billion, in cash and marketable securities.

Advanced Technologies Drive Revenue

The robust results were heavily fueled by demand from technology titans like Nvidia Corp. and Apple Inc. Notably, 77% of the company's wafer revenue now comes from advanced process technologies—7-nanometer and below. The company's 2-nanometer process, which has Apple Inc. as a key customer, already accounted for 3% of wafer revenue during the quarter. Taiwan Semiconductor expects a steep production ramp in the third quarter as demand for leading-edge chips continues to accelerate.

Raises 2026 Outlook And Capital Spending

Taiwan Semiconductor expects third-quarter revenue of $44.6 billion to $45.8 billion and forecast a gross margin of 65% to 67%. The company raised its full-year 2026 revenue growth outlook to slightly above 40% in U.S. dollar terms. Additionally, Taiwan Semiconductor increased its 2026 capital spending plan to $60 billion to $64 billion, up from its previous forecast of $52 billion to $56 billion, with most of the investment supporting advanced process technologies. Huang noted that the ramp of its 2-nanometer technology will reduce gross margin by about 3 to 4 percentage points, but strong customer demand and ongoing cost improvements should offset part of that impact.

AI Demand Drives Expansion Amid Sector Volatility

Chairman and CEO C.C. Wei stated that demand tied to artificial intelligence remains extremely robust and that the company has strong confidence in the long-term AI growth trend. Wei said agentic AI is increasing demand for data center CPUs while also boosting demand for AI accelerators and other advanced chips. He added that Taiwan Semiconductor is working closely with customers developing x86, Arm-based and RISC-V processors to align production capacity with long-term product roadmaps. The company plans to invest another $100 billion in its Arizona operations, bringing its total planned investment there to $265 billion.

DA Davidson analyst Gil Luria reiterated a Buy rating and raised the price target to $500, calling the increased capital expenditure guidance "highly bullish" for meeting continued demand for leading-edge process technologies and the emerging agentic AI market.