TSMC (TSM) Stock: TSMC Warns AI Chip Demand Will Outpace Supply for Years

TLDR

• TSMC CEO C.C. Wei told shareholders chip supply will fall short of AI-driven demand for years, even as US capacity expands.
• TSMC reiterated full-year sales growth guidance of more than 30%.
• The company plans at least four additional US chipmaking plants, on top of six already planned, requiring roughly $100 billion more in capital.
• Wei confirmed TSMC has purchased ASML’s High-NA EUV machines but won’t deploy them for mass production until they’re financially viable.
• TSM stock slid 1.7% in Taipei after Broadcom issued a disappointing outlook.

Taiwan Semiconductor Manufacturing (TSM) stock slipped 1.7% in Taipei on Thursday after CEO C.C. Wei told shareholders the company will not be able to keep up with AI-driven chip demand for years — even as new US manufacturing capacity comes online.

Taiwan Semiconductor Manufacturing Company Limited, TSM

TSM shares have still more than quadrupled over the past three years, driven by explosive growth in its core business supplying chips to the likes of Nvidia and AMD.

Wei reiterated TSMC’s forecast for full-year sales growth of more than 30%. The company raised that outlook just weeks ago, in April, when it also said capital spending would likely trend toward the upper end of a range reaching as high as $56 billion.

The demand crunch is coming from the top of the industry. Major hyperscalers are set to spend a combined $725 billion on AI infrastructure this year alone, and TSMC is the key supplier for advanced chips powering much of that buildout.

Despite the supply constraints, Wei said TSMC will not respond with sharp price hikes. The goal, he said, is to keep the business stable and predictable for customers.

US Expansion Plans Take Shape

As part of a US-Taiwan trade agreement, TSMC envisions building at least four additional chipmaking plants in the United States, on top of six facilities already planned. That adds roughly $100 billion in new capital requirements, on top of the $165 billion already committed.

Wei said two plots of land TSMC has acquired in Arizona should be enough to support its US expansion needs for a decade.

The US push is partly a response to customer pressure. Nvidia, Broadcom, and others are competing for slots at TSMC’s most advanced production nodes, and geographic diversification helps ease political and supply chain risk.

TSMC employees will also see the benefit. Wei confirmed staff will receive an average bonus increase of more than 30% this year, as pressure mounts on AI winners to distribute more of their gains.

Next-Gen Chipmaking Tools Already Purchased

Wei addressed shareholder concerns about TSMC’s position in next-generation chipmaking technology, specifically around ASML’s High-NA EUV lithography machines.

These machines, which can print smaller and denser transistor configurations than current tools, cost up to $400 million each. Intel has already adopted the technology. TSMC has not yet deployed it for mass production.

Wei confirmed TSMC has purchased the equipment and is conducting research and development on it. The hold-up is economics, not capability. TSMC will only put the machines on the production floor once using them is profitable at scale.

He declined to say how many units TSMC has bought.

The comments follow similar remarks from TSMC executive Kevin Zhang in April, when he described the new machines as “very expensive” and said current goals remain achievable with standard EUV tools. Those comments briefly sent ASML stock lower.

Wei told shareholders Thursday that TSMC’s current focus is on making existing chipmaking machines run more efficiently to reduce manufacturing costs.

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