The world's largest contract chipmaker has beaten forecasts again, adding to a run of hardware results that suggest the AI investment cycle is holding firm.
The AI bubble shows no sign of popping. Taiwan Semiconductor Manufacturing Co (ADR) (NYSE:TSM) reported first-quarter revenue of $35.71 billion on Friday, up 35% on the year and ahead of analyst estimates, driven by demand from AI applications. Its shares rose 2.3% on the day and are up 29% so far this year.
Set alongside what the rest of the AI hardware supply chain has been reporting, the result looks like part of a pattern.
Nvidia Corp (NASDAQ:NVDA, XETRA:NVD), whose chips TSMC manufactures, posted record full-year revenue of $215.9 billion for fiscal 2026, up 65%.
Its data centre division brought in $62.3 billion in the fourth quarter alone, up 75% on the year.
Foxconn, Nvidia's biggest server manufacturer, reported a 30% rise in first-quarter revenue year-on-year. Broadcom posted record fiscal 2025 sales of $63.9 billion.
The bubble argument
The sceptics are not short of material. Morgan Stanley analyst Todd Castagno has argued that AI capital spending is on course to exceed the capex-to-sales ratio seen during the dot-com era, reaching 34% this year and 37% by 2028.
For 2026, hyperscalers have pledged close to $700 billion on capital expenditure, much of it flowing to Nvidia.
Revenues for Alphabet, Amazon, Meta and Microsoft grew an average of 16.5% in 2025, while their capital spending grew 60%. If current plans hold, spending will grow 80% in 2026 while revenues grow just 15.5%.
Goldman Sachs analysts found that hyperscaler companies have taken on $121 billion in debt over the past year, a rise of more than 300% from their typical load. Venture capitalist Bill Gurley has said he expects the spending to hit a wall. "One day, I just think we trip and run out of money on those things," he said.
Why the hardware numbers complicate that picture
TSMC's customers are not ordering chips on spec. They are responding to committed purchase orders from hyperscalers with deep balance sheets and long investment horizons.
Foxconn building servers and TSMC manufacturing at this pace reflects strong demand.
Goldman Sachs Research has also noted that consensus capex estimates have proven too low for two years running. At the start of both 2024 and 2025, analysts projected growth of around 20%. In reality, it exceeded 50% in both years.
TSMC will report full first-quarter earnings, including an updated outlook, on April 16. Those numbers will be read as another data point in a debate that is far from settled. For now, the hardware keeps shipping and the revenues keep rising.