Taiwan Semiconductor Falls 3% Despite Record Quarterly Profit; Intel Drops 4%, AMD Slides 3%

Taiwan Semiconductor Manufacturing (NYSE:TSM | TSM Price Prediction) stock trades at $418.90, down 3% even after the chipmaker posted a sixth consecutive quarter of record profit. A record report from the world’s largest dedicated semiconductor foundry isn’t stopping the selling, and the weakness is spreading across chip names.

Meanwhile, Intel (NASDAQ:INTC) stock is at $94.33, down 4% and sliding more faster than Taiwan Semiconductor stock. Also, Advanced Micro Devices (NASDAQ:AMD) stock is at $552.98, down 3% and falling in step with Taiwan Semiconductor stock.

For a sector-level read, the iShares Semiconductor ETF (NASDAQ:SOXX) is at $504.75, down 3%. At the same time, the broader tech fund Invesco QQQ Trust (NASDAQ:QQQ) is at $720.55, down 1%, so semiconductors are falling harder than the large-cap technology benchmark.

Record Profit Streak Collides With Sector Selling

Taiwan Semiconductor reported its Q3 2026 results with revenue and net income both sharply higher than a year earlier, extending its record-profit streak to a sixth straight quarter. The results beat estimates on demand tied to the artificial intelligence (AI) boom. Its current-quarter sales guidance also landed above what analysts had modeled.

On the earnings call, Chief Executive Officer C.C. Wei stated that demand for Taiwan Semiconductor’s leading-edge technologies remains extremely robust, pointing to rising adoption of agentic AI. “The AI market continues to be very strong,” Wei declared, adding, “We did not see any sign of slowdown.” One soft spot sits in gross margin, which narrowed from the preceding quarter.

Foundry Results Set the Tone for Chip Designers

Taiwan Semiconductor builds the advanced processors other companies design, so its results read as a demand signal for the whole chip complex. The company pioneered the pure-play foundry model and manufactures for fabless designers and integrated device manufacturers, with fabs across Asia, Europe, and North America.

Advanced packaging extends Taiwan Semiconductor’s reach beyond wafers, and management described chip-on-wafer-on-substrate (CoWoS) packaging as customers’ top choice. A partnership on silicon interposers is also aimed at easing a significant backend shortage.

Intel takes a different path, designing and fabricating its own chips across a manufacturing footprint in the U.S., Europe, and Asia. Its Intel Foundry business also offers process technologies and advanced packaging to outside customers. AMD represents the other end of the spectrum, leaving manufacturing to foundries while it designs server processors, graphics chips, and AI accelerators.

Margin Pressure Gives Skeptics an Opening

Skeptics of Taiwan Semiconductor stock point to the fact that shares ran hard into the report and had already priced in a good quarter. Selling into a record result fits that pattern, and the narrower gross margin gives skeptics a fresh talking point.

Management attributed the decline primarily to dilution from the initial ramp of its newest process node. Overseas fabs add further cost pressure, though productivity gains and capacity optimization across nodes provide a partial offset. Taiwan Semiconductor’s capital spending is also set to climb well above recent levels, and management said, “If we do our job right, the increase in revenue will outpace the increase in CAPEX.”

Demand still exceeding supply anchors the bull case. Wei said, “Based on our assessed demand, we still think the demand is higher than the supply, and we are working very hard to narrow the gap.” That pull is broadening with the shift “from chatbot to AI assistants,” and capacity expansion in Taiwan, Arizona, and Japan gives the company room to capture more of it (we highlighted seven non-chipmaker suppliers riding the same buildout, from power to cooling, in a free AI infrastructure report).

Next Test Centers on Spending and Margins

Taiwan Semiconductor’s next quarterly report could show whether its margin trajectory holds as capital spending rises. Management expects dilution from overseas fabs to widen in the next few years as more U.S. capacity comes online.

For the iShares Semiconductor ETF, the open variable is the market’s appetite for AI hardware after record results from the sector’s bellwether foundry failed to steady chip stocks. Investors should consider keeping their position sizes modest until the market’s read on artificial intelligence spending resolves.

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