Tech & AI
Taiwan Semiconductor slides despite strong quarterly results on AI chip demand
Taiwan Semiconductor's shares slid 1.8% after a quarter that topped its own forecast. Its chief executive flagged heavier factory spending that may weigh on margins before new plants pay off.
Quick Read
- Taiwan Semiconductor reported third-quarter revenue above its own forecast, driven by demand for AI, smartphone and high-performance computing chips.
- Its shares slid 1.8% as the chief executive flagged higher spending on new factories and said profit gains will take time.
- Intel and GlobalFoundries also fell, even as the S&P 500 rose 0.3%.
- Intel reports results on Oct. 29, the day after the Fed's rate decision on Oct. 28.
What did Taiwan Semiconductor report for the quarter?
Taiwan Semiconductor Manufacturing (NYSE: TSM) builds chips that other companies design. On Thursday it reported third-quarter results that beat expectations. Revenue came in above the top of its guidance, the company's own forecast for its results.
Why it matters: Demand for chips used in AI, smartphones and high-performance computing drove the gain. High-performance computing, which includes the chips inside AI data centers, was the company's biggest source of revenue. Sales of chips for cars also rose, according to the company.
Gross margin, the share of sales left after production costs, slipped from the prior quarter. The company tied the dip mainly to the early, costly ramp-up of its newest manufacturing technology.
Why did the shares fall after a strong quarter?
The shares slid 1.8% to $422.25 on Thursday. The decline cut $40 billion from the company's stock market value.
On the earnings call, Chief Executive C.C. Wei said there is "no ceiling" to the company's profitability. He added that significant gains will take time. He also named higher capital spending, the money a company puts into new factories and equipment, as a key consideration.
Heavier spending can weigh on profit margins before new factories start producing. That trade-off may help explain why the stock fell despite the strong quarter.
Other chipmakers also declined. Intel (Nasdaq: INTC) slid 2.8%, and GlobalFoundries (Nasdaq: GFS) fell 0.4%. The broader market moved the other way. The S&P 500, a broad gauge of large U.S. companies, rose 0.3%.
What is the company forecasting?
Taiwan Semiconductor's guidance points to higher revenue in the fourth quarter than in the quarter just reported. It now expects solid revenue growth for all of 2026, measured in U.S. dollars.
Wei said the company has seen no signs of a slowdown in AI demand. He said that demand is spreading beyond AI accelerators into processors and networking chips. Demand still exceeds supply, he said, and the company is "working very hard to narrow the gap."
The company kept its 2026 capital spending plan unchanged. It said investment from 2026 through 2028 is expected to significantly exceed what it spent in the prior period. It is building advanced factories and packaging sites in Taiwan and abroad, and it is weighing further expansion in Texas. A new Arizona plant is on track to start production slightly ahead of schedule, according to the company.
What could come next for chip stocks?
What’s next: The open question is timing. Wei said the profit gains will take time. The spending is happening now. Whether that pays off may depend on AI demand holding up, which the company says shows no sign of fading.
Intel is scheduled to report quarterly results on Oct. 29. The Federal Reserve announces its interest-rate decision on Oct. 28 at 2 p.m. ET. The government's first estimate of third-quarter economic growth follows on Oct. 29 at 8:30 a.m. ET.
For readers
What it could mean for you: People who own a technology or semiconductor fund may feel this story more than broad index fund holders. A sector fund concentrates on one industry, so news from one large chipmaker can spread across the peers it holds. The technology sector fund (XLK) fell 0.7% on Thursday. The broader market gained. Heavier factory spending across the industry could press on chipmakers' margins for a time. Intel's results on Oct. 29 may give these fund owners another read on how chip companies are faring.
Questions and answers
Why did Taiwan Semiconductor stock fall after beating expectations?
The shares slid 1.8% after the report. Chief Executive C.C. Wei flagged higher capital spending and said significant profit gains will take time, which may have weighed on the stock.
What did Taiwan Semiconductor's CEO say about profitability?
C.C. Wei said there is "no ceiling" to the company's profitability. He added that significant gains will take time and that the cost of expanding advanced production remains a key consideration.
Is AI demand for Taiwan Semiconductor chips slowing?
Wei said the company has seen no signs of a slowdown. He said demand still exceeds supply and is spreading into processors and networking chips.
When does Intel report earnings?
Intel is scheduled to report quarterly results on Oct. 29.
The numbers
| Taiwan Semiconductor Manufacturing Company (TSM) price | $422.25 |
|---|---|
| Taiwan Semiconductor Manufacturing Company (TSM) change | −1.80% |
| Taiwan Semiconductor Manufacturing Company (TSM) market value | $2.2 trillion |
| Intel (INTC) price | $95.37 |
| Intel (INTC) change | −2.80% |
| Intel (INTC) market value | $480 billion |
| GlobalFoundries (GFS) price | $48.76 |
| GlobalFoundries (GFS) change | −0.37% |
| GlobalFoundries (GFS) market value | $27 billion |
| S&P 500 change | +0.33% |
| 10-year Treasury yield | 5.10% |
Thursday’s close
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