Why TSMC’s 34% Revenue Surge Points to a Strong Semiconductor Market
World’s largest contract chip maker, Taiwan Semiconductor Manufacturing Company (TSMC) has reported a 34% surge in revenue in the first two months of 2025. According to Yahoo Finance, the chipmaker reported revenues amounting to $16.8 billion.
Analysts project a 41% growth in TSMCs quarter one revenues. TSMC’s revenue climb is a reflection of a resilient semiconductor market and a sign that demand for Nvidia AI chips remains high.
Demand for AI Chips
Being one of the leading producers of AI chips, TSMC Q1 revenue points to the industry’s performance. Tech companies and investors have started discussing the sustainability of the AI boom that catapulted Nvidia to become one of the most valuable firms in the world.
This debate has become more pronounced following the emergence of Chinese AI bot, DeepSeek, whose researchers have claimed cost much less to develop.
“Taiwan’s robust growth in integrated circuit exports in January imply AI chip sales are driving up TSMC’s revenue, export data show,” Bloomberg Intelligence Analysts Masahiro Wakasugi and Takumi Okano wrote.
Even so, semiconductor market trends show that demand varies for different wafer sizes.
“While 300-mm silicon wafer shipments signal a recovery, 200-mm wafers appear to reflect weaker automotive and industrial demand. Electric components need an order pickup from consumer-device companies,” the analysts added.
Reassuring the Market
Following the market sell-off triggered by DeepSeek earlier this year, big techs have been seeking to reassure investors that AI computing spending remains healthy. Broadcom is the latest tech company to make this move. Last week, Broadcom stocks surged 6.7% after the company forecasted revenues of about $14.9 billion in quarter 1. Analysts had projected a $14.6 billion average sales.
Broadcom’s projections are pegged on AI growth. The report by the Apple chip supplier shows that the historic AI spending frenzy is still strong. Over the years, the company has benefited from AI spending as its data center customers invest huge amounts in building new AI infrastructure.
Last month, Nvidia’s earnings suggested that demand for AI remains robust. The tech giant’s quarter four report indicated that AI infrastructure that heavyweights like Microsoft and Amazon are building is still relevant. Nvidia Q4 results reflected a 78% increase in the tech company’s quarterly revenue, which was largely driven by rising demand for AI chips. Nvidia’s data center business, where it sells high-end GPUs to artificial intelligence models, remained a top revenue contributor.
Taiwanese chip maker Hon Hai Precision Industry Company also reported a 25% increase in revenue in the first two months of this year. The company attributed this rise to the launch of new products by its clients and a surge in AI-related orders.
Chip Import Tariffs
TSMC and other chip manufacturers currently face uncertainty due to potential chip import tariffs that US President Donald Trump has threatened to introduce. The giant chip maker could have benefited from stockpiling or front loading ahead of these tariffs. While meeting with President Trump at the White House last week, TSMC CEO CC Wei committed an additional $100 billion investment in the US, the largest outlay that a foreign company in manufacturing has made in the country. This move was viewed as a bid to avoid tariffs.
Back in Taiwan, TSMC’s US investments raised concerns that the company could be shifting advanced technology away from the Island country. TSMC defended its decision to make the investment in the US, saying it will not affect local investments. In a joint statement with the Taiwanese President, Wei reassured the public of the company’s commitment to boost investments in Taiwan where it would produce and retain its highly advanced technology.
According to Cecilian Chan, Bloomberg Intelligence credit analyst, the additional $100 billion investment will not affect TSMC’s credit ratings. This is because the company already has a high net cash position of about $44 billion. However, it could extend the time needed for the company to break-even. This could affect its profit margins if Trump decides to terminate CHIPS Act funding.
