TSMC’s $15.6 Billion Quarter Shows the Cost of AI Growth

Taiwan Semiconductor Manufacturing Co. spent $15.59 billion on capital projects in the quarter ended June 30, about 42% more than in the prior quarter, according to TIKR’s calculation. TSMC reported the amount as $15.7 billion in its July earnings call.

The spending surge came alongside strong results. Second-quarter revenue reached $40.2 billion, up 33.7% from a year earlier, while net income rose 77.4% to NT$706.56 billion.

TSMC raised its 2026 capital-spending budget to between $60 billion and $64 billion, citing strong customer demand, including from the emerging agentic-AI market. The range was above its previous $52 billion to $56 billion forecast.

Most of the investment is aimed at advanced chipmaking. TSMC said 70% to 80% of this year’s budget would go to advanced process technologies, with another 10% to 20% for packaging, testing and related work.

That capacity supports the latest chip generations used in AI accelerators and other high-performance computing products. TSMC said advanced technologies made up 77% of wafer revenue in the second quarter, while 2-nanometer chips contributed 3% as production began ramping.

For TSM shares, the spending is a bet that demand will justify expensive new capacity. More production can support future sales, but construction and equipment costs arrive before all the added capacity generates revenue.

Investors should also watch profitability as new factories and processes come online. TSMC’s second-quarter gross margin was 67.7%, but its third-quarter forecast called for 65% to 67%, partly as the company ramps newer technology.

The next test is whether strong demand translates into enough chip shipments to absorb the investment. TSMC forecast third-quarter revenue of $44.6 billion to $45.8 billion, offering investors a near-term gauge of that growth.