TSMC Hits Record High Amid Robust Earnings and AI Growth, But U.S. Scrutiny Looms

Shares of Taiwan Semiconductor Manufacturing Company (TAIWAN: TSM) surged to an all-time high on Friday, propelled by impressive earnings that surpassed analysts’ expectations. Closing at T$1,085 (approximately $33.77), TSMC's stock rose by a notable 4.8%, eclipsing its previous peak of T$1,080 set on July 11. This remarkable performance positioned TSMC with a staggering market capitalization of around $874 billion, making it the most valuable company in Asia.

The broader market also reacted positively, with the benchmark index increasing by 1.9%. Investors are particularly excited about TSMC's robust quarter, which revealed a striking 54% year-over-year profit increase. Furthermore, the company has offered an optimistic revenue outlook for the remainder of the year and the next five years, signaling sustained growth driven by an escalation in artificial intelligence (AI) demand across diverse sectors.

However, caution lingers in the air following reports of a U.S. investigation into whether TSMC has been manufacturing chips for Huawei, the Chinese tech giant affected by U.S. export restrictions. This potential scrutiny comes at a time when TSMC counts major players like Apple (NASDAQ: AAPL) and Nvidia (NASDAQ: NVDA) among its clientele, both of which are heavily invested in the AI revolution.

Despite the political storm brewing in the background, analysts maintain a generally bullish outlook on TSMC's prospects. Venson Tsai, an analyst at Cathay Futures Consultant, suggests that the stock may still have room to climb, as its current price does not fully reflect the long-term potential poised by the ongoing AI boom. TSMC has reaffirmed its commitment to compliance with international regulations and has indicated that it would take necessary steps should any concerns arise, including investigations and proactive communication with stakeholders.