Taiwan Semiconductor Manufacturing, also known as TSMC, is one reason to believe that an AI bubble does not exist.
If there was any doubt that artificial intelligence (AI) was in a bubble, the recent quarterly figures show Taiwanese semiconductor manufacturing (TSM +2.21%) should help allay investor fears. While the report itself was strong, with the semiconductor contract manufacturer seeing its revenue rise 26% to $33.7 billion, it was the guidance that should get investors excited.
Taiwanese semiconductor manufacturing
Today’s change
(2.21%)$7.24
Current price
$334.61
Key data points
Market capitalization
$1.7 tons
Day range
$331.46 -$337.12
Range of 52 weeks
$134.25 -$351.33
Volume
521K
Avg. full
13M
Gross margin
59.02%
Dividend yield
0.92%
First, TSMC forecast first-quarter revenue to grow 38% at the midpoint of expectations and full-year revenue to rise 30%. More importantly, the company surprised investors when management decided to increase capital expenditures (capex) this year to between $52 billion and $56 billion, compared to about $41 billion in 2025.
When building new factories (chip production facilities), foundries like TSMC have to be very careful. An underutilized factory in an unprofitable factory, so the company must ensure that the added capacity will meet not only short-term demand but also ongoing demand.
As such, TSMC management has not made the decision to slightly increase capital expenditures. The company went out and didn’t just talk to its customers Nvidia And Broadcombut also for their customers, such as the large cloud computing companies. It wanted evidence that cloud computing providers were seeing strong returns on their data center investments and that there was still long-term demand for their infrastructure-as-a-service offerings. TSMC management apparently liked what they heard and decided to significantly ramp up its own chip production capacity.
Image source: Getty Images.
Numerous AI winners
By having a virtual monopoly on the production of advanced AI chips, TSMC is poised to remain a winner of the ongoing AI boom. Meanwhile, manufacturer of semiconductor equipment ASML will be another major beneficiary. ASML has a monopoly on the extreme ultraviolet lithography (EUV) machines needed to make advanced chips, and as TSMC ramps up its capital expenditures, a fair chunk of that will go to ASML’s machines.
Nvidia, whose graphics processing units (GPUs) are the main chips used to power AI workloads, will also continue to benefit significantly from the increasing demand for AI infrastructure. This also applies to other chip companies, including Nvidia’s competitor Advanced micro devices and Broadcom, which helps companies create custom AI chips. It is also good for memory makers such as Micronas AI chips require high-bandwidth memory (HBM) to perform optimally, and other data center component makers.
The cloud computing industry should also benefit, with leading companies reporting that they see no signs of a slowdown in demand and are indeed seeing strong returns on their data center investments. This includes the three major cloud providers — Amazon, MicrosoftAnd Alphabet — along with Oracle and neocloud providers such as KernWeef And Nebius group.
Overall, the AI market seems far from a bubble; it looks like the party is just getting started.
Geoffrey Seiler has positions in Alphabet, Amazon and Broadcom. The Motley Fool holds positions in and recommends ASML, Advanced Micro Devices, Alphabet, Amazon, Micron Technology, Microsoft, Nvidia, Oracle, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
