By Sherry Qin

Taiwan Semiconductor Manufacturing Co.'s shares are on track to close at a record high after it delivered an earnings beat and raised revenue guidance for 2025 despite multiple headwinds.

Shares of the world's largest contract chip maker in Taipei were up 2.2% Friday morning at 1,155 New Taiwan Dollars, equivalent to US$39.25. TSMC's shares have climbed steadily over the past three months and are set to surpass the previous high reached in January. Shares had taken a hit earlier this year amid concerns about the sustainability of AI spending and U.S. President Trump's tariff policy.

The company on Thursday reported a 61% jump in second-quarter net profit from a year earlier to 398.27 billion New Taiwan dollars, equivalent to US$13.57 billion, topping market expectations. Its revenue rose 39% to NT$933.79 billion.

The chip maker raised its guidance for 2025 revenue growth to around 30% from a mid-20% rise projected earlier despite headwinds from U.S. tariffs and unfavorable foreign exchange rates.

According to analysts, TSMC's commanding lead in chip making and advanced packaging technology should help sustain its industry leadership and long-term growth.

Management highlighted in a post-earnings call on Thursday that the capacity for both advanced chips and advanced packaging remains tight versus demand and it is trying to narrow the gap.

Its next-generation 2-nanometer chips, scheduled for mass production later this year, would require substantial manufacturing complexity and highly refined 3D process control, Citi analysts said in a research note.

TSMC's long-standing expertise in process control, which is one of its core competitive advantages, should support selling its value, the analysts added.

Meanwhile, DBS analyst Jim Au said the market hasn't fully appreciated TSMC's advanced packaging technology, which could become a major profit driver in the coming years. As chips grow smaller, finding smarter ways to integrate different types of chips has become a more important way to improve performance.

While U.S. tariff policy uncertainties have clouded the company's outlook, TSMC chief executive C.C. Wei has downplayed the tariff impact on its business. On Thursday, he reiterated that the company hadn't seen any changes in customers' behavior.

"TSMC is undervalued as the market is overestimating tariff effects and underestimating the longevity of AI investments," Morningstar analyst Phelix Lee said, adding that Taiwan could reach a trade deal with the U.S. before the August 1 deadline.

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

July 17, 2025 23:39 ET (03:39 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.