Taiwan positions itself as Washington’s AI partner as TSMC earnings underline strength of chip boom

Under the agreement announced this week, Washington will reduce tariffs on a range of Taiwanese exports while Taipei encourages large-scale investment in US chip manufacturing, AI infrastructure and energy projects.

Taiwanese officials described the package as a deliberate attempt to move the relationship beyond traditional trade and into a long-term strategic partnership built on advanced technology.

The timing is pointed. Demand for AI computing continues to surge and Taiwan Semiconductor Manufacturing Company (TSMC), one of the dominant producers of the world’s most advanced chips, has again demonstrated how critical the island is to the global digital economy.

The company’s fourth-quarter earnings shattered market expectations, delivering a 35% jump in profit and marking its eighth consecutive quarter of year-on-year growth. Revenue reached a new high as hyperscale cloud providers and AI developers competed for supply of the processors that train large language models and power next-generation data centres.

TSMC said it now expects capital expenditure of between $52bn and $56bn in 2026, up from $40.9bn in 2025, a signal that the company sees no immediate slowdown in AI-driven demand.

Those figures arrive amid persistent debate over whether investment in AI has outpaced real-world adoption. For Taiwan’s government, the numbers strengthen the argument that the island should be treated as an indispensable partner rather than simply another exporter.

Kate Leaman, chief market analyst at AvaTrade, said the results mark a turning point in how investors view the sector. “TSMC’s Q4 smash results are more than just a strong earnings print, they are a signal that the AI cycle is transitioning from purely narrative to infrastructure. The combination of record revenue, surging profits and its mix of advanced nodes underscores that TSMC has become the go-to operating system for AI compute.”

Leaman added that the quarter reinforces the company’s pricing power in leading-edge manufacturing and provides greater visibility on multi-year AI spending from hyperscalers and chip designers.

“The key question now is not whether AI sustains growth, but how TSMC sequences its global capacity build-out and capital intensity without diluting returns,” she said, noting that demand is gradually broadening from data centres into devices at the network edge.

For the U.S, closer alignment with Taipei offers a way to secure supply chains that have become strategically sensitive. The US has spent recent years trying to rebuild domestic chip production, and Taiwanese investment is viewed as essential to that effort. Taipei, meanwhile, hopes that deeper integration with the American AI ecosystem will protect its economic relevance as geopolitical tensions with China continue to simmer.

The approach is not without risks. Leaman warned that the wider industry still faces “latent fragilities”, including export controls and the concentration of leading-edge manufacturing in only a few locations. Taiwanese lawmakers are also scrutinising whether too much production could migrate overseas.

As AI moves from experiment to infrastructure, Taiwan is betting that its unrivalled expertise in semiconductor manufacturing can anchor a new era of cooperation with the United States, one in which tariffs, investment and technology strategy become parts of the same equation.

AMD sets out end-to-end AI roadmap at CES 2026, from AI PCs to yotta-scale data centres

Samsung forecasts record profit, crediting AI boom for rapid growth