Power

When DeepSeek released its low-cost large language model in January 2025, semiconductor shares fell. The logic was simple. If a model can be built cheaply, the expensive GPUs matter less; efficiency rises, so demand falls. That logic has, so far, been wrong. The unit price of inference has dropped by nine-tenths since 2023. Yet the tokens consumed have not fallen but exploded. On Bain & Company’s reckoning, the price per token halved between December 2024 and December 2025 while tokens consumed grew 4.5 times over the same period. Microsoft’s chief executive, Satya Nadella, greeted DeepSeek’s release with the line “Jevons paradox strikes again”. The nineteenth-century economist William Stanley Jevons found that as the steam engine grew more efficient, coal consumption rose rather than fell. A resource that gets cheaper is not used less; it opens new uses and its total climbs. ...

In the second quarter of 2026 Taiwan Semiconductor Manufacturing Company spent $15.7bn on plant and equipment. Add the first quarter and the half-year total reaches $26.8bn. On the same day it reported those figures, the company raised its full-year capital budget to a range of $60bn-$64bn, up from the $52bn-$56bn it had guided in January. Management gave two reasons: demand that keeps climbing, and tools now bought at inflation-era prices. Free cash flow fell by NT$60.8bn over the quarter, which the company attributed to capital spending outrunning the growth in operating cash. The quarterly report sets it all out. ...