Shares slid as TSMC delivered a blockbuster quarter only to stun markets with a far larger spending bill than anyone expected. Q2 net profit surged 77% to a record $22 billion , revenue hit $40.2 billion — up 36% year-over-year — and gross margin reached an all-time 67.7% . None of it was enough. TSMC fell 7.3% in Taipei , and the Brazilian-listed depositary receipts dropped 3.9% to BRL 252.43, capping a five-session slide of roughly 10% as the broader chip sector buckled.

  • The Spending Shock Outweighed the Earnings Blowout. CFO Wendell Huang raised 2026 capital expenditure to $60–$64 billion, up from a prior $52–$56 billion range, with 70–80% earmarked for cutting-edge chip production . That is roughly a 15% budget increase in a single quarter. Higher capex can pressure free cash flow and margins , and investors calculated that even record revenue cannot easily absorb an extra $8 billion in annual spending right away.

  • A $265 Billion Arizona Gamble Raises Long-Term Questions. CEO C.C. Wei announced an additional $100 billion to build four more advanced fabs in Arizona, lifting TSMC's total U.S. commitment to $265 billion across 10 factories, two packaging plants, and an R&D center . Management warned that overseas factory ramp-ups will dilute gross margins by 2–3 percentage points initially, widening to 3–4 points in later stages . For a company whose premium valuation rests on industry-leading profitability, even a temporary margin hit matters.

  • Demand Is Not the Problem — Paying for It Is. TSMC raised its full-year 2026 revenue growth forecast to above 40% in dollar terms, up from a prior above-30% guide . Q3 revenue guidance of $44.6–$45.8 billion came with projected gross margins of 65–67% — a step down from Q2's record, reflecting overseas cost drags. A JPMorgan trader summed it up: the bar was simply set too high .

  • Analysts Remain Bullish, but the Market Is Skeptical. Susquehanna raised its price target to $600, and Bank of America maintained its Buy rating . Most view the selloff as a timing issue — capex rises now to protect market share later — rather than a demand problem . Yet execution in Arizona still faces labor, water, and visa constraints , and TSMC's top 10 customers account for 85% of receivables , meaning any pullback in AI spending by a handful of tech giants would hit hard.

The bottom line: TSMC is printing money today, but the market is pricing the risk that its massive construction spree — the largest foreign investment in U.S. history — compresses profits faster than revenue can grow.