TSMC breaks big revenue milestone in thumping fourth quarter. Chip-equipment makers are rallying.

By Jules Rimmer Taiwan Semi cites relentless demand for its high-performance chips TSMC detailed plans to accelerate the building of new plants in Taiwan and Arizona, U.S.A in a bullish outlook for 2026. Taiwan Semiconductor Manufacturing's fourth quarter revenue exceeding the NT$1 trillion mark ($33.1 billion) was just one impressive statistic amid an earnings release that dazzled across all metrics on Thursday. Aside from improving profitability, guidance for both capex and sales in 2026 were encouraging not just for TSMC (TW:2330) itself but also for other chipmakers and the AI complex as a whole. In pre-market trading, TSMC's U.S.-listed shares (TSM) jumped more than 6%. Also climbing were Nasdaq futures (ES00), the Magnificent Seven exchange-traded fund MAGS responded positively and suppliers to TSMC, like Applied Materials (AMAT) and Lam Research (LRCX), chalked up powerful gains. U.S.-listed shares of Dutch-based ASML (ASML), which provides critical lithography machines to TSMC, advanced 5%. The results met with a chorus of approval from analysts. "The world's largest chipmaker just sent a clear message: the AI boom is nowhere near done," said Matt Britzman, senior equity analyst at Hargreaves Lansdown. "These results aren't just good for TSMC - they're a roadmap for where the next leg of AI investment is headed." TSMC's net income for the fourth quarter of 2025 reached NT$505 billion (approximately $16 billion), up 35% year on year and comfortably ahead of analyst expectations around the NT$470 million mark. Sales rose 20% year on year to top NT$1 trillion - but it is the revenue and capex guidance on which markets are likely to focus. Previous market consensus for 2026 capex centered around $48-$50 billion, but TSMC is now guiding for something in the range of $52-$56 billion, including some major spending commitments in the U.S. where a new facility in Arizona is planned and the bringing forward of semiconductor fabrication plant build-outs in Taiwan. Britzman commented: "TSMC is typically cautious on capacity given the chip industry' boom and bust cycles so this aggressive build-out suggests they see a durable runway for AI demand stretching well into the next decade". JPMorgan's tech research team led by Gokul Hariharan wrote in its first take on the numbers that they expect the stock will continue to rise, "given better gross margins and stronger growth into 2026-27". JPMorgan reckons consensus earnings forecasts could improve by 7-10% after this. In a posting on X, CNBC commentator Jim Cramer added, "this is a rebuke to those who worry about the bubble". Chief financial officer Wendell Huang also upped TSMC's guidance on operating margins, now deeming 54%-56% to be sustainable, compared to 52% beforehand. Revenue growth is expected to reach 30% in 2026, again in advance of the 25% researchers were anticipating. TSMC is raising its long-term profitability guidance for 2026 ING's analyst on the stock Marc Hesselink also observed that "aggressive investment reflects sustained AI-driven demand and tight supply conditions." Hesselink pointed out that the declaration of intent on capex would be very positive for suppliers to TSMC like ASML (NL:ASML), BESI (NL:BESI) and ASM International (NL:ASM). The read-across for the likes of Nvidia (NVDA) and AAPL (AAPL) who buy many of TSMC's high-performance chips is also positive, added Britzman. Viewed by many as a bellwether for the ongoing AI bonanza as it provides 90% of the world's most advanced chips, TSMC is comfortably the largest stock in Asia with a market capitalization of roughly $1.4 trillion and it's also the biggest component of the MSCI Emerging Markets index EEM with a weighting of almost 12%. Sentiment among the analyst community towards TSMC is almost universally positive. There are around fifty recommendations submitted to FactSet, for example and there are no sell ratings and only one calling for a hold. Every other house says 'buy ' and the mean target price is roughly 15% ahead of the current level before the round of upgrades these latest results are starting to generate. -Jules Rimmer This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal. (END) Dow Jones Newswires 01-15-26 0706ET