TSMC shares fell approximately 2% on Thursday, despite the company's strong Q2 performance and a raised revenue growth forecast for 2026.

Strong Earnings and Revenue Growth

The Taiwan Semiconductor Manufacturing Company reported Q2 earnings per share of $3.49, surpassing the consensus estimate of $3.31 by $0.18. Revenue reached $35.49 billion, slightly above the anticipated $35.47 billion and marking a 40.6% year-over-year increase. This performance was primarily driven by high demand in AI-linked High Performance Computing.

For 2026, TSMC raised its capital expenditure guidance to between $60 billion and $64 billion, up from a previous estimate of $52 billion to $56 billion. The company also committed an additional $100 billion for capacity expansion in Arizona. Analysts view this increase as a positive indicator for the semiconductor industry.

Analyst Reactions and Price Target Adjustments

Following the earnings report, several analysts adjusted their price targets for TSMC. Wedbush raised its target to NT$3,000 from NT$2,900, maintaining an Outperform rating. Susquehanna increased its price target to $600 from $575, citing the significant capex increase and the company's strong prospects. Needham retained its Buy rating at $480, highlighting the accelerating demand for AI-related computing.

Despite the positive adjustments from analysts, TSMC's stock opened at $419.43 and has a market cap of around $2.18 trillion. The stock's 52-week range stands between $223.70 and $479.00.

Concerns in Mature Chip Nodes

While TSMC's overall growth outlook remains strong, there are concerns regarding the demand for mature chip nodes. Needham's analyst Charles Shi noted a quarter-over-quarter revenue decline in 45/40nm, 28nm, and 16nm nodes, suggesting potential challenges ahead. This could be a warning sign for TSMC's diversification strategies as it continues to focus on advanced technologies.

TSMC's strong quarterly performance is expected to have a ripple effect on major clients such as Nvidia and Apple. Wedbush indicated that TSMC's results bode well for Nvidia, which holds a leading position in the AI chip market. For Apple, the results present a mixed outlook, as smartphone revenues increased by 11% year-over-year, although growth momentum appears to have slowed compared to Q1.

This material is for informational purposes only and should not be considered financial advice.