Key Takeaways
- TSMC (TSM) reported a record Q2 net profit of NT$706.6 billion ($21.98 billion), far exceeding analyst estimates of NT$632.6 billion due to "exceptionally strong" AI demand.
- The company significantly raised its FY2026 capital expenditure guidance to a range of $60 billion to $64 billion, up from the previous forecast of $52 billion to $56 billion.
- UK Monthly GDP grew by 0.1% in May, rebounding from a contraction in April, as a 0.3% expansion in the services sector offset declines in industrial production and construction.
- TSMC announced a massive $100 billion U.S. investment expansion in Arizona, focusing on N2 (2nm) process technology and advanced packaging to support American clients.
- Japan's 30-year government bond yield climbed to 3.835%, while the Topix index fell 1.6%, reflecting tightening fiscal conditions and broader market volatility.
TSMC Dominates with Record Earnings and Massive Capex Hike
Taiwan Semiconductor Manufacturing Co. (TSM) solidified its position as the primary beneficiary of the global AI boom, reporting a 77.4% year-over-year jump in net income for the second quarter. The company’s revenue hit NT$1.27 trillion, driven by insatiable demand for advanced 3nm and 5nm technologies from major clients like Nvidia (NVDA) and Apple (AAPL). Management noted that AI-driven demand for data center CPUs and accelerators is "extremely robust" and expected to persist through the third quarter.
To meet this demand, TSMC is accelerating its global manufacturing footprint. The company now expects 2026 capital expenditures to reach as high as $64 billion, signaling a more aggressive expansion than previously anticipated. This includes the development of 13 advanced semiconductor and packaging facilities in Taiwan and a new $100 billion investment in Arizona. The U.S. expansion will specifically target the N2 process and advanced packaging, aiming to resolve supply chain bottlenecks for high-performance computing.
UK Economy Shows Resilience Amid Manufacturing Slump
The UK economy returned to growth in May with a 0.1% GDP increase, matching market expectations. While the headline figure suggests stability, the underlying data reveals a divided economy. The services sector, which accounts for roughly 80% of UK output, grew by 0.3%, led by professional services and computer programming. Conversely, industrial production fell by 0.5% and construction output dropped 0.8%, hampered by high interest rates and a sharp decline in mining and quarrying.
Despite the monthly volatility, the UK's three-month GDP growth stood at a healthy 0.7%. This resilience comes even as the manufacturing sector faces headwinds, with manufacturing production edging up only 0.1%. Analysts suggest that while the services-led recovery is encouraging, the continued contraction in construction and industrial sectors may complicate the Bank of England's path toward further interest rate adjustments.
Japan Markets Face Pressure as Yields Rise
Japanese financial markets experienced a turbulent session as the 30-year Japanese Government Bond (JGB) yield rose to 3.835%. This upward pressure on yields follows global trends of tightening monetary policy and concerns over Japan's fiscal trajectory. The rising yields weighed heavily on equity markets, with the Topix index sliding 1.6% to close at 4,021.59.
In the corporate sector, TSMC announced plans to strengthen its Japan manufacturing footprint by increasing mature node capacity. This move is seen as a strategic effort to support the local automotive and industrial electronics sectors. However, the broader Japanese market remains sensitive to currency fluctuations and the potential for the Bank of Japan to further adjust its yield curve control policies in response to persistent inflationary pressures.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.