Taiwan Semiconductor Manufacturing Company Limited TSM

The business

TSMC manufactures semiconductors designed by others, Nvidia, Apple, AMD, Broadcom, Qualcomm, and the hyperscalers' custom silicon, and sells fabrication, advanced packaging, and test as a service. The engine is high-performance computing: 66% of Q2 2026 revenue, up 20% sequentially, and effectively all of the incremental growth. Advanced nodes (7nm and below) are 77% of wafer revenue, with 5nm at 33%, 3nm at 30%, and 2nm contributing its first 3% as the ramp begins. Fabs remain concentrated in Taiwan, with Arizona, Japan, and Germany expanding; alongside the Q2 print the company added $100B to its Arizona plans, taking the total US commitment to $265B.

What the financial statements do not show is that TSMC is the sole manufacturing source for essentially every leading-edge AI accelerator in production; no customer of consequence has a second fab to defect to, which is where the pricing power and the record margins come from. The moat, in one sentence, is process leadership compounded by an ecosystem of design tools and packaging that resets in TSMC's favor at every node; how durable that is belongs to a deeper audit. What changed in the last two quarters is the spend: full-year 2026 revenue guidance moved from above 30% growth to slightly above 40% (the third raise this year), capex moved from an original $52-56B to $60-64B per the CFO on the July 16 call, and management guided a further 3-4 point gross-margin dilution in H2 from the steep 2nm ramp.