TSMC Just Blinked--Is the AI Chip Boom Finally Slowing Down?

This article first appeared on GuruFocus.

Taiwan Semiconductor Manufacturing Co. (NYSE:TSM) just hit a speed bump in its record run. The chipmaking giant posted a 16.9% rise in October salesits slowest growth since February 2024raising quiet questions about whether the AI boom is shifting gears. The pullback comes as investors digest a rare slump in Asia's tech stocks and a wave of cautious commentary from Wall Street heavyweights, including Michael Burry (Trades, Portfolio)'s Scion Asset Management, which recently disclosed bearish wagers on Nvidia (NASDAQ:NVDA). Still, TSMC's stock has climbed roughly 37% this year, a sign that investors remain confident in the long-term AI buildout even as quarterly growth steadies around 16%.

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Yet underneath the short-term jitters lies a capital-spending surge unlike anything the industry has seen. Meta (NASDAQ:META), Alphabet (NASDAQ:GOOG), Amazon (AMZN), and Microsoft (NASDAQ:MSFT) are collectively preparing to unleash more than $400 billion in AI-related investments next yeara 21% jump from 2025as they battle for dominance in next-generation computing. That kind of spending could keep TSMC's order books packed, even if growth fluctuates month to month. For investors, the takeaway could be that the AI cycle is no longer a straight line upward, but a long runway punctuated by pauses as demand and supply recalibrate.

Nvidia (NASDAQ:NVDA) CEO Jensen Huang remains upbeat. Fresh from a two-day trip to Taiwan, Huang met with TSMC's C.C. Wei to secure more chip supply, calling his company's growth stronger and stronger by the month. TSMC, which also produces chips for Apple, Advanced Micro Devices, and Qualcomm, remains the beating heart of the AI hardware ecosystem. Qualcomm's Cristiano Amon recently said the world is still underestimating AI's potential, while Wei acknowledged that capacity remains very tight as TSMC races to close the gap between soaring demand and limited supply. For now, the message from both executives seems aligned: the AI race may be cooling in pacebut not in ambition.

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