TSMC reported a record second quarter, but investors focused less on the earnings beat and more on the rising cost of the AI boom.

The world’s largest contract chipmaker posted second-quarter revenue of $40.2 billion, at the top end of its guidance. Reuters reported that TSMC’s net profit jumped 77 percent year-on-year to a record T$706.6 billion, or about $22 billion, beating market expectations.

The results confirmed that demand for advanced AI chips remains strong.

TSMC is a key supplier to Nvidia and Apple, and it manufactures chips for many of the companies driving the current AI buildout. Reuters described the company as a bellwether for AI chip demand, while TSMC also guided for third-quarter revenue of $44.6 billion to $45.8 billion.

However, the market reaction showed that strong earnings alone are no longer enough.

TSMC shares fell after the company raised its spending plans. Investing.com reported that TSMC’s U.S.-listed shares dropped about 4 percent in premarket trading as investors reacted to the higher capital expenditure forecast and possible pressure on margins.

The main concern was TSMC’s new capital expenditure target.

TSMC raised its 2026 capex forecast to $60 billion to $64 billion, compared with its earlier guidance of $52 billion to $56 billion. Reuters reported that the company also expects capital spending over the next three years to be significantly higher than in the past three years.

That is a positive signal for long-term AI chip demand, but it also raises a difficult question for investors: how much money must the AI industry keep spending before the returns become clear?

The selloff was part of a wider reassessment of AI-linked stocks.

The Guardian reported that the Philadelphia Semiconductor Index fell around 4.8 percent, bringing its month-to-date decline to about 20 percent and pushing it into technical bear-market territory. The report also said chip and tech stocks were under pressure as investors questioned whether the AI rally was sustainable.

This matches a broader concern already raised by major market watchers.

Goldman Sachs Research recently said U.S. tech investment as a share of GDP has moved above its 1990s peak, while spending plans from the largest cloud and computing companies for 2026 are nearly 50 percent higher than estimates from six months earlier. Goldman also warned that investors may be overestimating how long above-average profits can last for AI infrastructure suppliers.

The Bank for International Settlements has also warned about the risk of an AI investment race.

A recent BIS paper said firms can over-commit capital during major technology cycles, and that debt or circular financing can create financial fragility if returns disappoint. It compared the pattern with earlier boom-bust cycles, including railways and the dot-com boom.

That does not mean the AI boom is collapsing. TSMC’s results show that demand is still strong, and CEO C.C. Wei said the company’s confidence in the multi-year AI trend remains high.

However, the market reaction suggests investors now want evidence that AI spending will translate into durable profits, not just higher revenue for chip suppliers.

TSMC will likely continue posting strong results as long as cloud companies, AI labs, and chip designers keep expanding data centers.

The harder question is whether the companies buying those chips can generate enough revenue and profit to justify the scale of spending.

For now, TSMC’s record quarter delivered a clear message: the AI boom is still powerful, but investors are no longer willing to ignore the cost.

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