Taiwan Semiconductor Manufacturing Company (TSMC) has reported a robust 35% surge in fourth-quarter profit, surpassing analyst expectations and setting a new record, largely fueled by the insatiable demand for artificial intelligence chips. This marks the eighth consecutive quarter of year-over-year profit growth for the world’s largest contract chipmaker.
During the December quarter, TSMC’s revenue climbed 20.5% from the previous year to exceed NT$1 trillion, also outperforming forecasts. The company’s financial performance underscores its pivotal role in the burgeoning AI ecosystem, as it manufactures advanced AI processors for industry leaders like Nvidia and AMD.
The high-performance computing (HPC) segment, which encompasses AI and 5G applications, constituted the lion’s share of TSMC’s sales in the fourth quarter. A significant indicator of the company’s technological prowess is the increasing proportion of revenue derived from advanced chips. In the reported quarter, chips fabricated using 7-nanometer or smaller process nodes accounted for 77% of total wafer revenue, up from 74% in the full year 2025 and 69% in 2024. This trend highlights the industry’s relentless pursuit of miniaturization, where smaller nanometer sizes translate to more compact transistor designs, leading to enhanced processing speeds and improved energy efficiency.
“The demand for AI remains incredibly strong, propelling overall chip demand across the entire server industry,” commented Jake Lai, a senior analyst at Counterpoint Research. He anticipates 2026 to be another “breakout year” for AI server demand, further bolstering TSMC’s prospects.
Lai added, “With TSMC’s ongoing expansion of its 2nm capacity and new production contributing to revenue, coupled with continuous advancements in advanced packaging, TSMC is poised to sustain strong performance through 2026.”
However, challenges may lie ahead. Lai cautioned that chip demand linked to consumer electronics, such as smartphones and personal computers, could face headwinds due to the ongoing memory chip shortage and subsequent price increases. This dual dynamic – soaring AI demand contrasted with potential softness in consumer segments – presents a complex landscape for TSMC and the broader semiconductor industry. The company’s strategic investments in cutting-edge manufacturing processes and its strong customer relationships position it well to navigate these evolving market conditions.
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