TSMC (Taiwan Semiconductor Manufacturing Company) reported Q1 2026 earnings that strongly exceeded expectations, with net profit up 58% to NT$572.48 billion, marking a new record for the fourth consecutive quarter. Total revenue reached NT$1.134 trillion, a 35% increase year-on-year and also surpassing market forecasts.
The key driver this quarter remained the surging "AI demand," especially high-performance chip orders from major clients like Nvidia and Apple. This pushed the High Performance Computing (HPC) including AI segment to account for 61% of total revenue. Advanced chips at 7 nanometers and below made up 74% of revenue, while chips under 3 nanometers accounted for 25% and continued to grow, reflecting accelerated global investment in AI infrastructure.
/ C.C. Wei, CEO of TSMC, stated, “Demand related to AI remains exceptionally strong,” and forecasted that full-year 2026 revenue will grow over 30%. He added that the company is using every possible approach to increase production capacity to meet customer demand across all platforms.
TSMC’s figures underscore that the semiconductor industry is currently in an "AI Supercycle." However, on the other hand, TSMC shares fell after the earnings announcement, illustrating a new cycle within chip stocks.
TSMC’s Q1 results reflect the broader semiconductor industry in the AI era, where the market is growing strongly but beginning to face new constraints. The company’s numbers confirm the industry is still on the upswing driven by AI, which has become a new structural force pulling demand toward high-performance chips.
Although demand is high, TSMC clearly reveals the industry is facing capacity constraints. The company disclosed plans to accelerate capital expenditure (CapEx) to between US$52 billion and US$56 billion to expand production by building new fabs both in Taiwan and overseas.
Another key signal is that chip manufacturing itself is no longer the sole bottleneck. Advanced chip packaging technologies, such as CoWoS (chip-on-wafer-on-substrate), have become a new bottleneck. Nvidia, which has booked most of the packaging capacity, has pressured TSMC to accelerate building new packaging plants in both Taiwan and the U.S. to meet growing demand.
Despite better-than-expected results and confidence that AI will remain the industry’s main driver for years, TSMC’s stock fell not due to weak business but because the market had higher expectations. This phenomenon is not unique to TSMC but also seen with ASML and Nvidia, as chipmakers currently cannot increase capacity fast enough, potentially pushing the whole industry into a tight supply situation where bottlenecks shift further downstream in the supply chain.
Analysts from Counterpoint Research noted that AI chip demand has pushed TSMC’s capacity to "peak tightness," with the situation of demand exceeding supply (sold-out) expected to remain the main theme of the semiconductor industry throughout 2026.
TSMC’s strength is reflected not only in its financials but also at the national capital market level. Following TSMC’s Q1 earnings announcement, Taiwan's stock market capitalization reached US$4.13 trillion, surpassing the UK’s US$4.09 trillion to become the world’s seventh-largest stock market, according to Bloomberg. TSMC alone accounts for 45% of Taiwan's total stock market value.
TSMC’s share price has risen nearly one-third since the start of the year, reaching a record high of US$363, driven by the AI trend that has accelerated customer chip orders despite production capacity shortages.
Last year, most growth in Asian stock markets was driven by TSMC from Taiwan and chip manufacturers from South Korea such as Samsung Electronics and SK Hynix. In contrast, European markets, especially the UK, have few listed companies benefiting from the AI wave except for Dutch manufacturer ASML. If AI momentum continues, South Korea may be the next market with potential to overtake the UK.
TSMC demonstrates how the growth of a single company can elevate an entire national stock market above another country’s. Therefore, Taiwan surpassing the UK is not a coincidence but a phenomenon reflecting AI’s transformation of global capital markets. Investment capital worldwide is clearly flowing into countries within the “AI supply chain,” while countries with fewer deep technology firms may start to lose their competitive edge.
Source: CNBC[1],[2], Financial Times
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