AI Drives 60% of TSM's Q2 Revenues: Will the Growth Momentum Last?

Taiwan Semiconductor Manufacturing Company’s TSM recently reported financial results for the second quarter of 2025 highlight how artificial intelligence (AI) has become a key growth driver for its business. Revenues from its High-Performance Computing (“HPC”) platform, which includes most AI-related demand, increased 14% sequentially and accounted for 60% of second-quarter total sales.

Taiwan Semiconductor’s second-quarter revenues and EPS surged 44% and 67%, respectively, year over year in the US dollar terms. This robust growth was mainly driven by the strong adoption of TSM’s advanced 3nm and 5nm chips used in AI accelerators and data centers. The company is confident that the AI boom will continue supporting growth in the second half of 2025. It estimates full-year revenues to grow by around 30% year over year.

Rising AI workloads, on-device computing and sovereign AI projects are creating long-term demand for leading-edge chips. Taiwan Semiconductor’s close relationship with cloud and chip companies, along with aggressive investments in advanced nodes like N2 and A16, positions it well to capture this trend.

Taiwan Semiconductor’s leadership in process technology and growing manufacturing presence across the United States, Europe and Asia help strengthen its position. The company is also expanding its packaging and research & development capabilities to support future AI needs.

If AI adoption continues at its current pace, Taiwan Semiconductor could see sustained demand for its leading-edge chips. The Zacks Consensus Estimate for 2025 revenues is pegged at $118.18 billion, indicating a 31.1% increase from 2024.

How TSM’s Rivals Are Responding to the AI Boom

Intel INTC and GlobalFoundries GFS are also trying to grow their presence in AI chip manufacturing.

Intel is investing heavily in its foundry business, aiming to produce advanced chips. The company is currently focusing on its 18A process, which signifies 1.8nm chips. Intel’s 18A process is claimed to have higher performance and efficiency, which will help the company better compete with Taiwan Semiconductor’s upcoming N2 chips.

GlobalFoundries focuses more on mature nodes. However, the company is witnessing some AI-related demand, especially in edge computing and embedded AI. GlobalFoundries is working to expand capacity in the United States and Europe to attract customers looking for supply-chain flexibility.

TSM’s Share Price Performance, Valuation and Estimates

Shares of Taiwan Semiconductor have risen around 22.9% year to date compared with the Zacks Computer and Technology sector’s gain of 10.2%.

From a valuation standpoint, TSM trades at a forward price-to-earnings ratio of 23.22, lower than the sector’s average of 27.89.

The Zacks Consensus Estimate for Taiwan Semiconductor’s 2025 and 2026 earnings implies a year-over-year increase of 37.5% and 13.1%, respectively. Estimates for 2025 and 2026 have been revised upward in the past seven days.

Taiwan Semiconductor currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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