TSMC chip capacity is ‘fierce’ battleground for AI customers, amid record quarter

Key points

• TSMC posted record profit for a sixth straight quarter and expects fourth-quarter revenue to be 58% higher than a year earlier.
• Analyst Jordan Klein said competition for TSMC's wafer capacity is 'extremely fierce' and could threaten AI infrastructure investments.
• TSMC is adding $100 billion and 'several more' fabs to its Arizona plans, bringing its total commitment to $265 billion.

Taiwan Semiconductor Manufacturing Co. reported a record quarter as demand for its advanced chipmaking capacity from AI customers remains intense. The company expects fourth-quarter revenue to be 58% higher than a year earlier, driven by strong demand for its advanced technologies.

TSMC makes most of the world's most advanced semiconductors, including AI processors for Nvidia, AMD and Broadcom, and custom AI accelerators for Apple, Google, Amazon, Microsoft, Meta and OpenAI. Last year, TSMC said it had capacity to make more than 17 million 12-inch equivalent wafers, but customers want more.

Fierce competition for capacity

Mizuho Securities analyst Jordan Klein said the competition for TSMC's factory lines is 'extremely fierce' and described it as a game of who can get the most leverage and supply. He said that if compute demand keeps growing at its current rate over the next 12 to 18 months, capacity constraints at TSMC could threaten massive AI infrastructure investments and the aggressive revenue targets of AI companies.

TSMC North American CEO Sajiv Dalal told CNBC he receives at least 10 calls a day about wafer capacity. The company had 534 customers in 2025, with its top 10 accounting for 78% of net revenue and its top two bringing in 19% and 17% respectively.

The competition is extremely fierce. It's a game of who can get the most leverage and supply.

— Jordan Klein, an analyst at Mizuho Securities

Expansion and alternatives

TSMC is adding capacity with new fabs in Taiwan, Japan and Arizona, where it is making advanced chips in the U.S. for the first time. In July, it announced an additional $100 billion and 'several more' fabs to the six planned in Arizona, bringing its total commitment to $265 billion. It is also reportedly considering a new fab location in Texas.

Analysts say TSMC is installing tools such as ASML's extreme ultraviolet lithography machines in existing factories to ramp up capacity while new fabs are built. The constraints create an opening for Samsung and Intel to win customers. TechInsights analyst Dan Hutcheson told CNBC that people want a second source to be able to twist TSMC's arm and keep them honest on pricing, and that all the big chipmakers are now testing at Intel.