Why is TSMC stock rising today?

US-listed shares of Taiwan Semiconductor Manufacturing Co. rose nearly 4% in pre-market trading on Tuesday after a report said the world's largest contract chipmaker has finalized plans to increase chipmaking prices next year.

According to a Nikkei Asia report, TSMC has completed discussions with customers on base-price increases ranging from 5% to 10% for both advanced and mature semiconductor production.

The changes are expected to take effect in 2027 as the company seeks to offset rising manufacturing costs.

The report said TSMC began discussions with customers in June and concluded negotiations this month.

The planned increases would apply across advanced and mature chip production, while some artificial intelligence chip orders could face additional surcharges because of continued demand.

TSMC cites rising costs as AI demand drives expansion

The reported price increases come as TSMC faces higher costs for materials, manufacturing equipment and power while continuing to expand production capacity.

The company recently raised its 2026 capital spending outlook, citing strong AI demand and the increasing cost of expanding manufacturing capacity, including its Arizona operations, where its total investment pipeline now stands at $265 billion.

TSMC manufactures chips for some of the world's largest technology companies, including Nvidia, Apple, Advanced Micro Devices, Qualcomm, Amazon and Alphabet.

The Nikkei report said TSMC delayed the planned price increases until 2027 to give customers time to adjust.

Despite the reported pricing changes, the company reiterated its long-standing approach to customer relationships.

"We don’t suddenly increase our price," Chief Executive Officer C. C. Wei told analysts in July after reporting quarterly earnings. "We earn our value and we make sure that our profit, our gross margin is enough for our long-term sustained expansion, that’s to the benefit of my customers and TSMC also, that’s our philosophy."

TSMC also said in a statement on Tuesday: "Our pricing strategy is strategic, not opportunistic. We will continue to work closely with customers and sell our value to them."

AI chip customers may face higher surcharges

According to the report, TSMC's largest AI customers could see the biggest increases.

Orders for high-performance computing chips beyond previously agreed volumes may carry an additional surcharge of 10% to 15% on top of the base price increases.

As a result, some advanced AI chip orders could see total price increases exceeding 10%.

Advanced manufacturing nodes of 7 nanometers and below accounted for 77% of TSMC's second-quarter revenue, while mature nodes including 12nm, 16nm and 28nm contributed the remaining 23%.

The company continues to expand manufacturing capacity to meet demand for AI chips used in data centers, with customers such as Nvidia seeking faster production to ease supply constraints.

Strong earnings support outlook as analysts raise price target

Last week, TSMC reported second-quarter revenue of NT$1.27 trillion ($39.44 billion), ahead of Wall Street estimates of NT$1.26 trillion.

Adjusted earnings per share came in at NT$27.25, exceeding estimates of NT$24.29.

During an interview with CNBC last week, Chief Financial Officer Wendell Huang said TSMC is accelerating the buildout of its Arizona facilities to capitalize on the AI "megatrend."

"We’re seeing this strong-structure, multi-year demand, and we do not plan to leave any food on the table for anybody else," Huang said.

He added that the company's 2-nanometer technology is expected to become a larger revenue driver over the coming quarters.