Taiwan Semiconductor Manufacturing (TSM 4.23%) stock is moving higher Thursday in a bullish day for tech sector valuations. The company’s share price was up 4% as of 2 p.m. ET. At the same point in the day, the tech-heavy Nasdaq Composite index was up 1.8%.
TSMC stock is jumping today thanks to strong quarterly reports from Microsoft and Meta Platforms. In addition to posting sales and earnings results that beat Wall Street’s expectations, both tech giants gave updates on capital expenditures (capex) that bode well for the artificial intelligence (AI) chip space.
Microsoft’s and Meta’s latest quarterly reports signal strong demand for TSMC
Microsoft and Meta are two of the biggest players in AI software. They’re also two of the biggest purchasers of hardware for AI — with Microsoft ranking as Nvidia‘s largest customer and Meta ranking as its second-biggest buyer. TSMC manufactures Nvidia’s advanced processor designs and key AI chips from other semiconductor designers. Accordingly, TSMC investors often look to Microsoft’s and Meta’s capex data for demand indicators — and they got some encouraging news with yesterday’s quarterly reports.
Microsoft’s capex increased 53% year over year to reach $16.75 billion in the third quarter of the company’s fiscal year, which concluded March 31. The average Wall Street analyst estimate had targeted capex of $16.37 billion for the period. Meanwhile, Meta increased its capex target for this year to between $64 billion and $72 billion — up from its previous target for capex between $60 billion and $65 billion.
What’s next for TSMC?
The latest quarterly updates from Microsoft and Meta Platforms suggest that tech leaders are continuing to invest heavily in hardware to expand and strengthen AI infrastructure. Given that TSMC has a commanding lead when it comes to the fabrication of high-performance AI chips, this suggests a favorable demand outlook for the semiconductor fabrication giant.
But while TSMC will likely continue racking up manufacturing wins with AI chips, its stock comes with outsize exposure to geopolitical risks due to the company’s most advanced factories being located in Taiwan. China maintains that Taiwan is its territory, and TSMC’s significance in the AI race means that the company plays a crucial role in geopolitical competition between the U.S. and China. That could set the stage for some unfavorable twists and turns.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
