Taiwan Semiconductor Manufacturing Company (TSM) Raises Guidance as Demand for Advanced Chips Soars

Diamond Hill Capital's Q2 2026 letter for the International Fund revealed Taiwan Semiconductor Manufacturing Company (TSM) as a significant contributor to their performance. TSM, the world's leading contract chip manufacturer, experienced strong demand for its semiconductor services, leading to an increased revenue outlook. This was primarily driven by the rising demand for AI and high-performance computing chips.

TSM held a substantial 70% market share and boasted advanced manufacturing capabilities. Shares of TSM outperformed during the quarter, rising 2.49% over the past month and 73.51% over the past 52 weeks. With a market capitalization of $1.97 trillion, TSM ranked 6th among the 40 most popular stocks among hedge funds heading into 2026.

The company attracted the attention of 249 hedge fund portfolios at the end of the second quarter, up from 234 in the previous quarter. Despite Diamond Hill Capital acknowledging TSM's potential, they believed certain AI stocks presented greater upside potential with less downside risk.