$Taiwan Semiconductor(TSM.US)

Context: TSMC reported its third-quarter 2026 financial results. Driven by sustained growth in demand for AI chips and advanced nodes, both revenue and net profit reached record highs, with net profit surging nearly 69% year-over-year and beating market expectations. Financial results showed that TSMC's third-quarter revenue reached $46.72 billion, up 50.9% year-over-year and 17.6% quarter-over-quarter, exceeding the company's previous revenue guidance of $44.6 billion to $45.8 billion; net profit was also up 68.7% year-over-year and higher than analysts' expectations. In terms of profitability, the data showed it remained at a high level, with Q3 gross margin reaching 66.4%, up significantly from 59.5% in the same period last year, but down 1.3 percentage points from Q2; operating margin reached 58.7%, and net margin was 51.1%. TSMC stated that the sequential decline in gross margin was mainly affected by margin dilution from the initial volume production of its 2nm node.

My Trade: TSMC was up in the previous weeks before it retraced to a more reasonable level. Now, with hotter than expected CPI, it has dropped back to $400 and I'm buying the dips.

Takeaway: Advanced process technologies remained the core driver of this performance growth. In Q3, 2nm, 3nm, 5nm, and 7nm process technologies contributed 8%, 33%, 28%, and 10% of wafer revenue, respectively, with advanced technologies of 7nm and below accounting for a combined 79%. Among them, the revenue contribution from 2nm rapidly rose from 3% in the second quarter to 8%. By application, High-Performance Computing (HPC) revenue share rose further to 68%, up from 57% in the same period last year, reflecting that demand for AI servers and data center chips remains at a high level. Regarding capital expenditure, TSMC is expected to be in-line with its full-year 2026 capital expenditure guidance of between $60 billion and $64 billion by next quarter. @Captain's Treasure