⚠ Concentration in AI and a Few CustomersHigh threat

The flip side of TSMC's high-value customer relationships is a revenue base that is deep but narrow — HPC and AI now supply about two-thirds of revenue¹ — and increasingly tilted toward a single demand driver. A handful of giant customers account for a large share of leading-edge revenue, and high-performance computing and AI now make up roughly two-thirds of the business — so TSMC's fortunes rest heavily on both a small number of firms and a single, powerful, but cyclical trend. This concentration amplifies every risk that runs through the company: a stumble at a major customer, a pause in AI investment, or a downturn in a key end-market lands with outsized force because there is no broad, diversified base of demand to absorb it.

The concentration is the natural consequence of TSMC's leading-edge focus — only a few companies can afford and use the most advanced chips, and AI is where the leading edge's value is now concentrated — so it is not a flaw to be fixed so much as a structural feature of dominating the top of the market. But it means an investor in TSMC is making a concentrated bet: on a few specific customers continuing to thrive and to need TSMC, and on the AI build-out that now drives two-thirds of revenue continuing at something like its recent pace. TSMC's diversification into more customers, more end-markets (automotive, IoT), and more geographies spreads the base over time, and its indispensability means it captures whatever demand exists. But today the highest-value part of the business leans on a narrow set of customers and one dominant, extrapolated trend, and that concentration is the sharpest financial edge of an otherwise exceptionally durable franchise.