Taiwan Semiconductor Manufacturing Company (NYSE: TSM) surprised analysts once again with impressive fourth-quarter results, announcing a 35% rise in profit from the same period a year earlier. The company, widely known as TSMC, reported its highest quarterly earnings on record, capping a year that was largely defined by the accelerating demand for artificial intelligence chips. Shares opened more than 6% higher on the news, reflecting investor confidence in the chipmaker’s continued ability to capture the AI market’s momentum.
The company’s net profit reached the equivalent of about $16.9 billion (TWD 545 billion), beating forecasts from multiple analysts who had expected the numbers to level off after a year of strong gains. Instead, the company continued a remarkable trend that now stretches to eight consecutive quarters of year-over-year profit growth. That durability underscores how embedded AI hardware demand has become in the technology industry’s supply chain.
What drives this growth is not just a single product category but a broader shift toward advanced chip architecture. TSMC said chips produced using its 7-nanometer or smaller manufacturing technology accounted for 77% of its total wafer revenue for the quarter, an unusually high ratio in the semiconductor industry. These chips are designed to deliver the power and efficiency required by AI servers, machine-learning accelerators, and data centers that process immense computational workloads.
To those outside the semiconductor sector, these percentages may seem abstract. But in practical terms, the number highlights how deeply AI has penetrated the global technology manufacturing landscape. Major customers, including companies that design processors for AI systems, rely heavily on TSMC to produce their most advanced products. The rise of generative AI in 2024 created a surge in orders from both cloud computing providers and hardware designers racing to integrate AI capability into their systems. This has turned TSMC into a central figure in the AI economy, even as most consumers experience its influence indirectly through the products they use daily.
Despite the company’s technical dominance, this growth story has broader economic implications. The global chip industry entered 2026 in recovery mode after the supply constraints and demand fluctuations of the pandemic years. AI infrastructure spending, however, remains one of the few consistent engines of growth. Industry research estimates worldwide AI semiconductor revenue reached over $70 billion in 2025 and is on track to exceed $100 billion within three years. For TSMC, which continues to supply chips for nearly every major AI platform developer, this long-term demand surge provides a cushion against cyclical dips in consumer electronics or automotive segments.
Another factor underlying TSMC’s success is its steady investment in manufacturing capacity. The company has expanded its facilities outside of Taiwan, with major sites in the U.S. and Japan. These moves have political as well as strategic value, aligning with government efforts to localize semiconductor supply chains amid global trade tensions. While such expansions increase short-term costs, they also create more direct access to key markets and customers.
Still, the race to supply AI chips is not without challenges. Competition from Samsung Electronics and foundry newcomers in China continues to build. Moreover, producing chips at smaller and smaller dimensions pushes against physical and economic limits. Balancing innovation speed with cost efficiency is likely to remain TSMC’s defining challenge in the coming years. Yet, as the latest quarter shows, the company’s leadership in advanced chip manufacturing remains intact.
The broader takeaway is that the AI boom is reshaping the semiconductor landscape not just through software and algorithms but through the fundamental hardware enabling them. Taiwan Semiconductor’s record quarter offers a clear illustration of this shift. The company’s steady performance and expanding technological base suggest its growth streak may have more chapters ahead as AI continues to drive the global demand for computing power.
