Taiwan Semiconductor CFO Warns Of Margin Pressure, Prudent $42 Billion CapEx Plan

Taiwan Semiconductor Manufacturing Co (NYSE:TSM) stock traded lower Friday after its Thursday gains following upbeat quarterly results.

CFO Wendell Huang told Bloomberg that the contract chipmaker plans to stay cautious with spending in 2025 while accelerating global expansion to meet booming AI chip demand.

The company may invest up to $42 billion in capex this year, but is closely watching macro and foreign exchange risks, especially sharp currency swings that threaten margins.

Also Read: Taiwan Semiconductor’s Top Supply Chain Executive Exits

The key Nvidia (NASDAQ:NVDA) and Apple (NASDAQ:AAPL) supplier is fast-tracking its Arizona projects, aiming to begin production at a second plant by 2027 and potentially advancing a third due to customer demand.

Huang said the company expects up to 30% of its advanced 2nm capacity from Arizona eventually.

Meanwhile, Taiwan Semiconductor continues to review hedging strategies to navigate currency volatility, which Huang called a significant uncertainty.

Earnings

Taiwan Semiconductor reported strong second-quarter results, beating expectations on revenue, profit, and margins, driven by surging AI chip demand.

The company posted quarterly revenue of $30.07 billion, up 44% year-over-year in USD terms and 38.6% in New Taiwanese dollars, topping guidance and driven by advanced 3nm and 5nm chip technologies.

Net income jumped 61% year over year to $2.47 per share, while gross margin expanded to 58.6% and operating margin hit 49.6%.

High-performance computing and smartphone chips contributed 87% of revenue, with North America accounting for 75% of total sales.

For the third quarter, it expects revenue between $31.8 billion and $33 billion, with gross margins of 55.5%–57.5%. It cites strong demand for its cutting-edge process nodes.

Analyst Opinion

Needham analyst Charles Shi maintained a Buy rating on Taiwan Semiconductor with a price forecast of $270.

Shi commented that the chipmaker delivered another strong beat-and-raise quarter, raising the fiscal 2025 revenue growth outlook from 24-26% to ~30%.

The analyst highlighted that following a substantial 18% sequential growth in the second quarter (vs. 13% sequential guidance), Taiwan Semiconductor noted another 8% sequential growth in the third quarter (vs. prior implied guidance of ~flat sequential growth).

The company remains cautious on macro uncertainties and implied guidance for the fourth quarter represents a high-single-digit decline sequentially.

It hints that they are working on 2026 pricing increases, potentially offsetting foreign exchange induced gross margin dilutions, he told.

Taiwan Semiconductor has not received a signal from Nvidia to resume H20 production but sees substantial AI upside due to access to China, Shi noted.

As per the analyst, it signals continued CapEx growth in the future but hints at lower capital intensity in the future.

Shi projected third-quarter revenue of $32.4 billion (prior $29.3 billion) and EPADS of $2.65 (prior $2.40).

Price Action: TSM stock is trading lower by 0.37% to $244.70 at last check Friday.

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