Taiwan Semiconductor Manufacturing Co. (NYSE: TSM) reported a 77.4% year-over-year surge in second-quarter net income, driven by strong demand for AI chips and high-performance computing. The chipmaker’s revenue also expanded significantly, topping analyst consensus estimates for the period.

Third Point LLC, the hedge fund managed by billionaire Daniel Loeb, increased its stake in TSMC by 67% during the quarter. According to the firm’s latest 13F filing, Third Point held 460,000 shares as of June 30, up from 275,000 shares at the end of March.

Financial Performance

TSMC’s net income for the April-June period reached NT$706.56 billion ($22 billion), well above the NT$632.64 billion analysts had expected. This compares to NT$933.79 billion in the same quarter last year.

Revenue for the quarter rose 36% to NT$1.27 trillion ($39.45 billion), exceeding the consensus estimate of NT$1.264 trillion. For the first seven months of 2026, revenue climbed 37% to NT$2.872 trillion. July revenue alone jumped 44.7% year-over-year to NT$467.58 billion, rising 5.6% from June.

*Derived from source data stating Q2FY26 was up 77.4% from prior year.

Guidance and Capital Expenditure

The company expects third-quarter 2026 revenue to range between $44.6 billion and $45.8 billion. Based on an exchange rate assumption of NT$32 to the U.S. dollar, TSMC forecast a gross profit margin of 65% to 67% and an operating profit margin of 56% to 58%.

In July, TSMC raised its 2026 capital spending forecast to a record $60 billion to $64 billion, citing strong demand from AI, high-performance computing, and emerging AI agents as drivers for increased capacity needs.

Operational Updates

TSMC’s Arizona operations generated about NT$36.1 billion ($1.13 billion) in cumulative profit in the first half of 2026, more than double the NT$16.1 billion ($504.6 million) recorded for all of 2025. The plant reported roughly NT$18.8 billion ($589.2 million) in first-quarter profit, including NT$16.9 billion ($529.66 million) in investment income.

The company disclosed it will produce three new chips for Xiaomi Corp., expanding its role in Xiaomi’s semiconductor strategy. Additionally, TSMC and Sony Group Corp. plan to invest $6.3 billion in a state-of-the-art image sensor semiconductor plant in Kumamoto, Japan.

What the Numbers Show

The divergence between TSMC’s Arizona operation profitability and its global results highlights the early-stage nature of its U.S. expansion. While the Arizona plant generated NT$36.1 billion in cumulative H1FY26 profit, this figure is still modest compared to the company’s total Q2FY26 net income of NT$706.56 billion. However, the fact that H1FY26 Arizona profits more than doubled the full-year 2025 figure suggests rapid scaling efficiency, even as investment income constituted a significant portion (NT$16.9 billion of NT$18.8 billion) of the first-quarter operational profit, indicating that core manufacturing margins are still maturing relative to financial returns on idle cash or reserves.

Market Context

TSM shares were down 0.57% at $415.14 on Monday. The stock is trading about 12.8% above its 200-day SMA ($370.17) but sits below its 20-day SMA ($419.76) and 50-day SMA ($422.55), suggesting a short-term pullback within a long-term uptrend. Key resistance is identified at $436.00, with support near $405.50.

Analysts maintain a Buy rating with an average price target of $552.00. Recent actions include Bernstein raising its target to $554.00, Needham to $530.00, and DA Davidson to $500.00.

Taiwan Semiconductor Manufacturing Company Ltd. (NYSE: TSM) will manufacture three new processors for Xiaomi Corp. (OTC: XIACF). The deal expands TSMC's role in Xiaomi's semiconductor strategy.

The chipmaker's shares rose 0.62% to $420 in Wednesday's premarket session. This gain occurred despite a cautious broader market tone, with Nasdaq futures falling 0.21% and S&P 500 futures slipping 0.05%.

Xiaomi Chip Partnership

Xiaomi unveiled its Xring O3 smartphone processor on Monday. TSMC will produce the chip using its advanced 3-nanometer process. The Xring O3 has entered mass production and is expected to power Xiaomi's next flagship foldable phone. Xiaomi aims to ship between 200,000 and 300,000 units.

TSMC will also produce two other Xiaomi-designed processors:

• The 6-nanometer Xring O100, which will support Xiaomi's MiMo artificial intelligence model on consumer devices.
• The 3-nanometer Xring D100, targeting autonomous driving applications.

Both chips could enter use next year. The D100 could also support Xiaomi's growing electric vehicle business, which delivered 104,199 vehicles in the second quarter.

Investment Strategy

Xiaomi has invested more than 20 billion yuan (about $3 billion) in Xring development. It plans to invest at least 50 billion yuan ($7.0 billion) over 10 years. This strategy aims to reduce reliance on Qualcomm Inc. (NASDAQ: QCOM) and MediaTek Inc. (OTC: MDTKF).

Technical Analysis

TSMC shares traded near $420, sitting 14.2% above its 200-day simple moving average of $367.57. The stock was also 2.1% above its 100-day SMA of $411.20 but remained 1% below the 50-day SMA of $424.17.

The relative strength index stood at 50.21, indicating neutral momentum. Key resistance stands at $436, while support sits near $385.50.

Analyst Outlook

The stock trades at 31.1 times earnings. Recent analyst actions include:

The average price forecast is $552. TSMC carries a Buy consensus rating.