TSMC posts strong third-quarter results, but shares drop amid AI selloff

Taiwan Semiconductor Manufacturing Co. (TSMC) reported strong third-quarter financial results, outpacing expectations, while its shares fell by 2% due to a decline in AI stocks. The decrease followed a Twitter post about CoreWeave Inc., an AI cloud provider, revealing the company's high debt levels. Investors quickly sold off shares of AI-related companies, impacting chipmakers such as Samsung Electronics Co. and SK hynix Inc., which dropped more than 8%.

Intel Corp. also experienced a 6.6% drop. However, Nvidia CEO Jensen Huang reassured that CoreWeave’s cost of capital was decreasing, which may help manage debt issues. The AI sector significantly contributed to TSMC's revenue, accounting for 68% of the $46.36 billion generated. The high-performance computing segment, including Nvidia graphics cards, drove this growth, surpassing Wall Street's forecast of $45.4 billion.

TSMC's three-nanometer process, integral to high-performance computing, accounted for 33% of sales. The company has recently completed the construction of its three-nanometer Fab 2 plant in Arizona, with mass production expected to start in Q3 2027. TSMC's revenue growth was bolstered by rising demand for auto chips (up 22% YoY) and smartphone manufacturers (up 10%).

This surge in revenue led to a remarkable 69% increase in net income to $23.57 billion, exceeding analyst projections. Moving forward, TSMC aims to bolster its two-nanometer process capacity to maintain growth momentum and has announced a significant increase in capital expenditures over the next two years to fuel its expansion plans.