GoKawiilTSMC CoWoS chips: Sample microchips packaged using CoWoS at TSMC's offices in San Jose, California, shown to CNBC on February 20, 2026.
Two of the biggest names in chip manufacturing, Taiwan Semiconductor Manufacturing Co. and ASML, both reported strong earnings this week as demand for artificial intelligence chips remains sky high.
But that didn't seem to matter to Wall Street.
TSMC reported a 58% increase in first-quarter profits Thursday, beating estimates and hitting a new record. It was the fourth-consecutive quarter of record profits for the world's largest chip manufacturer.
"AI-related demand continues to be extremely robust," President and CEO of TSMC C.C. Wei said in an earnings call Thursday.
Yet TSMC shares fell about 2% on Thursday.
61% of TSMC's overall revenue in Q1 came from the high-performance computing segment, which includes AI chips made for its largest customer, Nvidia. That segment was up from 55% the previous quarter.
Gross margins also came in higher than last quarter at 66%, likely because TSMC's dominance in leading-edge chips allows it to raise prices for huge customers like Apple and Nvidia that rely heavily on chips made at 7nm and below. Those advanced chips made up about 74% of revenue.
One weak point was smartphone revenue, which fell 11% compared to the previous quarter as the industry faces an ongoing memory shortage.
Investors were also looking for impacts from the Iran war. TSMC executives said they don't expect any near-term impact from energy and supply chain disruption from the conflict, adding that it has a safety inventory of specialty gases, such as helium and hydrogen.
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