The world’s largest chipmaker, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) reported July revenue of NT$467.58 billion, or about $14.5 billion, up by 45% from a year earlier. That’s actually ahead of the company’s own recently raised full-year guidance of slightly above 40% growth in dollar terms. Chairman C.C. Wei called AI-related demand “extremely robust.” European chip stocks, including ASML, rose on the news even as the broader PHLX Semiconductor index sits roughly 15% below its June high.
Why This Matters
TSMC’s July numbers ran ahead of its own aggressive full-year guidance right as the rest of the chip sector has been selling off on worries about AI overspending.
That raises a fair question: is TSMC proving AI demand is still real, or is one strong month masking real cracks elsewhere?
The Bull Case
July’s 44.7% growth already outpaces Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s own raised guidance, which Quilter Cheviot analyst Ben Barringer called “no mean feat,” easing pressure on the rest of the summer. High-performance computing, the segment that houses AI chip production for customers like Nvidia and Google, made up 66% of TSMC’s second-quarter revenue, showing AI is now the core business rather than a side bet. TSMC also raised its 2026 capital spending guidance to a record $60 billion to $64 billion, a clear signal it expects demand to keep growing rather than plateau.
Separately, TSMC and Sony are reportedly in talks to invest a combined $6.4 billion in a Japan image sensor plant targeting 2029 production, aimed at demand from AI robots and self-driving cars. It is a second long-term growth avenue beyond AI chips.
The Bear Case
Analyst Barringer himself cautioned that monthly figures “can jump around” and shouldn’t be read too heavily into, so one strong July doesn’t guarantee August and September hold up. The broader semiconductor index has fallen about 15% from its June peak on concerns over AI data center overcapacity and whether the trillions being poured into AI infrastructure will ever pay off. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s own shares are down roughly 5% from their late-June high despite the beat, a sign some investors remain skeptical even as revenue climbs. TSMC’s business is also concentrated around a handful of major AI chip customers, which means its results are tightly tied to how long hyperscalers keep spending at this pace.
Insider Monkey’s Hedge Fund Data
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was held by 234 hedge funds as of Q1 2026, up from 224 a quarter earlier. That’s fewer holders than Nvidia’s 275 but more than Broadcom’s 173. TSMC sits solidly in the upper tier of AI chip supply chain names by hedge fund ownership, just behind the industry’s most popular stock.
Conclusion
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s numbers keep beating its guidance, but the stock’s recent pullback shows the market is more worried about the AI spending cycle than the company’s results alone suggest.
While we acknowledge the risk and potential of TSM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TSM and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
