Taiwan Semiconductor (TSM) Stock Drops as CEO Projects Years-Long AI Chip Supply Shortage

Key Takeaways

• Taiwan Semiconductor’s CEO C.C. Wei informed investors that chip manufacturing capacity will remain insufficient to satisfy AI demand for the foreseeable future, despite expanding US operations.
• The chipmaker maintained its annual revenue growth projection exceeding 30%.
• TSMC intends to construct at least four more US fabrication facilities beyond the six currently scheduled, demanding approximately $100 billion in additional investment.
• The CEO acknowledged acquiring ASML’s High-NA EUV lithography systems but stated mass production deployment awaits economic viability.
• Taiwan Semiconductor shares declined 1.7% in Taipei trading following Broadcom’s lackluster guidance.

Taiwan Semiconductor Manufacturing (TSM) stock experienced a 1.7% decline during Thursday’s Taipei session after Chief Executive C.C. Wei informed investors the semiconductor giant cannot satisfy AI-fueled chip demand for years ahead — despite substantial new manufacturing facilities launching in the United States.

Taiwan Semiconductor Manufacturing Company Limited, TSM

“Customer demand will exceed our capacity for an extended period,” Wei stated during the company’s annual investor gathering in Hsinchu, Taiwan.

Despite Thursday’s pullback, Taiwan Semiconductor shares have surged more than fourfold during the previous three years, propelled by remarkable expansion in its primary business serving semiconductor clients including Nvidia and AMD.

Wei reaffirmed TSMC’s projection for annual revenue expansion surpassing 30%. The semiconductor manufacturer elevated this guidance recently in April, simultaneously indicating capital expenditures would likely approach the upper boundary of a range extending to $56 billion.

The capacity shortage originates from industry leaders. Major cloud computing giants are projected to allocate a collective $725 billion toward AI infrastructure throughout this year, with TSMC serving as the critical provider for cutting-edge processors enabling substantial portions of this expansion.

Notwithstanding supply limitations, Wei indicated TSMC will avoid implementing aggressive pricing increases. The objective, he emphasized, centers on maintaining business consistency and reliability for clients.

American Manufacturing Footprint Expands

Under a bilateral US-Taiwan commercial arrangement, TSMC projects constructing a minimum of four additional semiconductor fabrication plants across the United States, supplementing six facilities already outlined. This represents roughly $100 billion in fresh capital obligations, exceeding the $165 billion previously allocated.

Wei noted two Arizona land parcels TSMC has secured should adequately accommodate its American expansion requirements for ten years.

The American initiative partly addresses client demands. Nvidia, Broadcom, and competing firms are vying for production capacity at TSMC’s most sophisticated manufacturing nodes, while geographical diversification mitigates geopolitical and logistics vulnerabilities.

TSMC personnel will also benefit from the growth. Wei confirmed employees will receive average compensation bonuses increasing beyond 30% this year, as mounting pressure encourages AI sector leaders to share prosperity more broadly.

Advanced Manufacturing Equipment Already Secured

Wei responded to investor questions regarding TSMC’s positioning in next-generation semiconductor production technology, particularly concerning ASML’s High-NA EUV lithography equipment.

These systems, capable of creating smaller and more densely packed transistor patterns than existing machinery, command prices reaching $400 million per unit. Intel has already integrated the technology. TSMC has not yet implemented it for volume manufacturing.

Wei confirmed Taiwan Semiconductor has acquired the equipment and is performing research and development activities. The constraint involves economics rather than technical capabilities. TSMC will only introduce the machines into production environments once utilizing them becomes financially sustainable at scale.

“We have secured that equipment, and our engineering teams are vigorously pursuing relevant research and development initiatives. It simply hasn’t reached deployment for high-volume manufacturing,” Wei explained.

He refused to disclose the quantity of units TSMC has purchased.

The statements echo comparable commentary from TSMC executive Kevin Zhang during April, when he characterized the new systems as “extremely costly” and stated current objectives remain attainable using standard EUV equipment. Those remarks temporarily pressured ASML stock downward.

Wei informed shareholders Thursday that TSMC’s present priority involves optimizing existing chipmaking equipment performance to lower production expenses.