The Customers Who Stopped Being Chip CompaniesNarrow moat

For most of TSMC's history its customers were fabless semiconductor companies: firms whose entire business was designing chips and selling them. That is no longer the whole picture, and TSMC says so — its filing observes that over the years its customer profile and the nature of its customers' business have changed dramatically, driven by the structural shift to high-performance computing, and that only a limited number of customers are successfully exploiting the new model¹.

What changed is that the companies buying leading-edge wafers increasingly are not chip companies at all. Cloud providers designing their own accelerators come to TSMC directly, as do the AI labs commissioning custom silicon through design partners. Their reason for existing is not to sell chips but to reduce what they pay for someone else's.

This is better for TSMC than it first appears. A fabless customer's orders are capped by its own ability to sell chips; a hyperscaler's are capped by its capital budget, which is currently enormous: Alphabet alone has guided 2026 capital spending to $195-205 billion², about three times TSMC's own $60-64 billion³. And because these buyers are competing with each other, TSMC ends up supplying every side of the same contest — the classic position of the arms dealer.

The catch is that a capital budget can be cut in a way a product roadmap cannot. Watch the share of revenue from high-performance computing against the concentration figures. The more of TSMC's business that traces to hyperscaler capex rather than to end-product demand, the more its revenue behaves like a capital-goods company's — which is not how it is currently valued.