Nvidia-Supplier TSMC Crushes It, Yet Chip ETFs Face A Tariff Storm

Zinger Key Points

At first glance, the numbers shout “boom.” Contract chipmaker Taiwan Semiconductor Manufacturing Company TSMC just reported record-breaking Q2 results. Profit jumped 61% year-over-year and revenue surpassed expectations.

Only a day prior, chipmaking equipment behemoth ASML Holding N.V. also beat top- and bottom-line estimates, riding on robust bookings.

But under the earnings sheen is a geopolitical snag: the rising specter of U.S. tariffs on Taiwan and chipmaking machinery, which threatens to dent margins and disrupt momentum in semiconductor ETFs such as VanEck Semiconductor ETF SMH, iShares Semiconductor ETF SOXX, and SPDR S&P Semiconductor ETF XSD.

See Also: TK

Earnings Are Booming, Courtesy AI

TSMC’s release was a mic drop moment for the bulls. The firm:

  • Posted NT$933.80 billion ($31.7 billion) in revenue, an increase of 38.65% year-over-year
  • Posted net income of NT$398.27 billion, surpassing estimates more than 5%
  • Estimated Q3 revenue of up to $33 billion, and estimated 30% year-to-date growth in 2025

CEO C.C. Wei attributed the boom to “strong, sustained demand for AI-related chips” and the company’s leading-edge nodes. Indeed, advanced chips (7nm and below) represented a whopping 74% of total wafer revenue. TSMC now produces high-performance processors for behemoths such as Nvidia, Apple, and AMD, firmly positioning it at the center of the AI value chain.

But ASML Sounds A Cautionary Note

Although ASML also reported better than expected results, Q2 revenue of $8.9 billion and net income of $2.66 billion—the mood was considerably less optimistic. CEO Christophe Fouquet cautioned that tariffs on chip production systems and components would press on margins, particularly if trade tensions heighten.

This was a wake-up call: even the most critical suppliers within the supply chain for AI are not exempt from policy shockwaves.

The Tariff Time Bomb: What’s At Risk?

That is where the tale turns from earnings to politics.

President Donald Trump has toyed with retaliatory tariffs on Taiwan, directly affecting TSMC’s U.S. business and exports. Taiwan is already subject to 32% tariffs on certain products, and chipmakers are also afraid that semiconductors will be the next.

Meanwhile, U.S. export restrictions remain in place restricting TSMC’s China business. Though Nvidia NVDA and AMD AMD recently were cleared to resume limited sales to Beijing, the long-term picture is cloudy.

Where Are Semiconductor ETFs Now?

Chip-themed ETFs have risen in 2025 in the wake of AI mania. But if tariffs turn from threat to reality, margin squeeze, order shift, and capex delay may be actual risks.

Here’s how some of the leading semiconductor ETFs are exposed:

  • SMH: TSMC is a strong holding (~12%), in addition to Nvidia, AMD, and ASML.
  • SOXX: Highly concentrated U.S. chip exposure, but has more than 3.5% of holdings in TSMC, and 3% in ASML.
  • XSD: Equal-weighted ETF, therefore more diversified, but still vulnerable to the global chip cycle.

Though these funds ticked up on Thursday morning in tandem with TSMC’s share price gain, this ride may be bumpier than it appears due to the geopolitics undertow.

Bottom Line: A Bipolar Earnings Season

This earnings cycle has thus far revealed that demand fundamentals for semiconductors are red hot, particularly for AI. But it’s also demonstrated just how much policy risk is entering the industry’s outlook.

As trade tensions escalate, semiconductor ETFs could be bracing for a reality check—one where earnings can’t undo politics.

For the time being, the AI boom is carrying the load. But if tariffs turn from political rhetoric into more, even the most sophisticated chips might not be able to crunch the consequences.

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Image: Shutterstock

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