By Yang Jie and Sherry Qin
Taiwan Semiconductor Manufacturing Co. plans to spend a record of up to $56 billion this year to feed the world's insatiable appetite for chips, as it grapples with pressure to build more factories outside Taiwan, especially in the U.S.
Massive investments in artificial intelligence have stoked fears of an AI bubble, but TSMC's planned capital expenditure of $52 billion to $56 billion--up 27% to 37% from last year--suggests that it doesn't expect any pullback in orders from clients such as Nvidia, Google and Apple.
"When you've got a business like TSMC spending at this level, investors should be prepared for sustained AI demand rather than a short-lived boom," said Zavier Wong, market analyst at eToro.
TSMC's chief executive, C.C. Wei, said at an earnings briefing Thursday that the decision to bulk up spending followed months of checks with major customers, and reflects verified AI-driven demand.
"If we didn't do it carefully...that would be a big disaster to TSMC," he said.
TSMC, the world's largest contract chip maker, is in a good position to spend big, entering 2026 with another blockbuster quarter of earnings results under its belt.
The need for the high-end silicon produced by TSMC powered net profit 35% higher to a record in the fourth quarter of 2025, topping consensus views, while revenue increased 20.5%.
TSMC's position as a critical manufacturer for U.S. tech giants has also put it in the middle of trade negotiations between Taiwan and the U.S.
Under pressure to bring more chip production to the U.S., TSMC last year pledged to invest $165 billion in the U.S. as Taipei negotiates with Washington for lower tariffs.
According to a Wall Street Journal report this week, TSMC is preparing to expand on that, building several new factories in Arizona, where it already operates a plant. No deal has yet to be announced, but it is near the finish line, the WSJ report said.
The company has already purchased another piece of land nearby, Wei said Thursday, without elaborating on its U.S. expansion plan.
According to the WSJ report, two of the planned new factories would focus on packaging chips, which provide supporting functions.
TSMC has long vied with rivals to see who can pack the most transistors onto a single chip. But as the semiconductors needed for AI become larger and more complex, they increasingly depend on tightly integrated memory, making packaging equally critical.
The AI boom has led to a global shortage of advanced packaging capacity, or the ability to bundle chips together.
TSMC plans to allocate about 10%-20% of capex this year toward packaging technology as it aims to ease the industry bottleneck that has left AI titans like Nvidia waiting for completed chip systems.
The payoff would be huge. TSMC's packaging business now delivers higher gross margins than its overall operations, analysts said.
Despite the high costs of expansion, TSMC's 60% gross margin suggests the chip maker has effectively passed along some geopolitical surcharges and higher electricity costs to customers.
Thursday's results and capex guidance should help ease some of the concerns about the geopolitical and supply challenges ahead.
"This was a decisive quarter that strengthened TSMC's role as a bellwether for the semiconductor and AI ecosystem," said Wong at eToro. "With margins at record levels and demand visibility improving, it provides markets with a strong validation that the AI investment cycle remains firmly in expansion mode."
--Joyu Wang contributed to this article.
Write to Yang Jie at jie.yang@wsj.com and Sherry Qin at sherry.qin@wsj.com
(END) Dow Jones Newswires
01-15-26 0445ET
