Were the chip stocks’ crash all blamed on TSMC? Swissquote: TSM’s capital expenditures have made the market fear AI will be overbuilt

Swiss online broker Swissquote senior analyst Ipek Ozkardeskaya said that TSMC raising its full-year capital expenditure outlook is likely the starting point of this round of tech stock selloff. TSMC’s second-quarter net profit surged 77% year over year, reaching about $22 billion to hit a historical high, yet the stock price doesn’t take that well, reflecting the market’s view that chip stocks are already overvalued. She said that amid concerns about oversupply of capacity, investors are becoming increasingly uneasy about large-scale AI buildouts, but technology companies are still splashing cash.
(Background: TSMC splashes another $100 billion to expand its U.S. plant! U.S. investment rises to $265 billion; the Trump administration counts its own achievements as well.)
(Background addition: U.S. stock “Seven Giants” earnings quick look: Microsoft, Amazon, Alphabet, and Meta all beat expectations in Q1! Cloud and AI businesses shine brilliantly.)

Table of contents

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• Earnings blowout, but the market is focused on capital expenditure
• Selloff spreads, and the market starts to fear AI is being built too much
• Next week’s big tech earnings are the next litmus test

Key takeaways

• TSMC’s second-quarter net profit rose 77% year over year, about $22 billion, to a historical high, but the stock reversed lower, and chip stocks weakened across the board.
• TSMC raised its 2026 full-year capital expenditure from $52 billion–$56 billion to $60 billion–$64 billion, stoking fears of AI capacity oversupply.
• The selloff spread to Asian markets; SK Hynix in Seoul briefly slid 11%, SoftBank fell by more than 9%, and the Nasdaq 100 index dropped by about 1.6%.

A gorgeous, record-breaking earnings report leads instead to a stock drop—doesn’t that seem a bit unfair for TSMC? TSMC’s second-quarter net profit rose 77% year over year, about $22 billion, not only setting a record high but also significantly beating market expectations. Demand for AI chips was so strong that the company upgraded its full-year revenue growth forecast from 30% to “above 40%” in one go. But after the earnings release, TSMC’s ADR initially fell by about 4.6% premarket; only later did it pare back its decline, and chip stocks followed with widespread green.

The market is never buying how much you earned last quarter—it’s what you’re going to spend next quarter. What made investors frown this time is the capital expenditure figure TSMC provided in parallel.

Earnings blowout, but the market is focused on capital expenditure

TSMC raised its 2026 full-year capital expenditure from the original $52 billion–$56 billion to $60 billion–$64 billion in one move, with the increase reaching up to 15%. About 70%–80% will go toward 2-nanometer and 3-nanometer—its most advanced process nodes. CEO C.C. Wei also announced an additional $100 billion to expand the Arizona plant, pushing TSMC’s total investment commitment in the U.S. to $265 billion.

The more aggressively the money is spent, the louder the market’s arithmetic gets. The real pain point is TSMC’s guidance for third-quarter operating margin of only about 57%, which is roughly 70 basis points below analysts’ expectations, and the ramp-up of 2-nanometer capacity will compress gross margin in the second half.

Hitting a new high in profit is the past; stepping up capital expenditure is the cost you’ll have to carry in the future. When a company tells the market “I’m making a lot of money” and “I’m going to spend more,” investors often hear the latter first.

Selloff spreads, and the market starts to fear AI is being built too much

Sitting at the very top of the global AI chip supply chain, TSMC’s earnings—even a small change in tone—can shake the whole chain. This time is no exception: selling pressure quickly spread from Taipei to Seoul and Tokyo. SK Hynix fell as much as 11% intraday, while SoftBank dropped more than 9%. In Europe, STMicroelectronics and Arm also fell roughly 4% to 4.6%. In the U.S., NVIDIA, AMD, and Micron all moved lower together, and the Nasdaq 100 index slid by about 1.6%.

Behind the selloff is a growing concern: will AI end up being built too much? Earlier, Meta announced it would sell off AI computing power it doesn’t plan to use—effectively puncturing the “compute is never enough” scarcity narrative, which already put pressure on chip stocks. TSMC’s aggressive capital expenditure adds fuel to that unease.

The numbers are also pointing to the same thing. UBS estimates that large cloud providers’ capital expenditure this year will surge 76% to reach $673 billion, but next year the growth rate will drop to 25%, and by 2028 it will fall to just 6%. The peak of heavy spending may be right in front of us.

Next week’s big tech earnings are the next litmus test

Move to next week: Alphabet, and other U.S. tech giants such as Microsoft will hand over earnings one after another. The market had hoped they could give some life back to a relatively weak sentiment. But Ipek Ozkardeskaya’s view isn’t that optimistic.

She warned that there are signs Alphabet and other companies are further increasing infrastructure spending. If the earnings report again delivers an even larger bill for AI buildouts, it likely won’t boost confidence—it would instead broaden worries about “runaway capital expenditure,” continuing to weigh on the stock price. The reason the record-high earnings report from TSMC didn’t win over the market is never about whether it earned enough; it’s about how much more money the entire AI industry still has to burn, and how long that burning will last.

Common questions

Why did TSMC’s stock fall despite its earnings hitting a record high?

Because TSMC simultaneously raised its 2026 capital expenditure to $60 billion–$64 billion, and its third-quarter operating margin guidance of about 57% is below analysts’ expectations. The market is starting to worry that AI buildouts won’t recoup as fast due to capacity oversupply, so capital is pulling out of chip stocks.

Why is Swissquote’s analyst worried about next week’s tech earnings?

Swissquote’s Ipek Ozkardeskaya believes that if big tech companies like Alphabet further add to AI infrastructure spending in next week’s earnings, it may again magnify market concerns about uncontrolled capital expenditure—ultimately dragging down stock prices instead of lifting sentiment.