The stock of Taiwan Semiconductor Manufacturing (TSM 0.51%) is seeing modest gains Thursday following the company's recent quarterly release. The semiconductor fabrication leader's share price was up 0.9% as of 3 p.m. ET today and had been up as much as 3.8% earlier in the day.

TSMC published its first-quarter results before the market opened this morning. While sales fell slightly short of the market's expectations, the business posted better-than-expected earnings.

TSMC delivered an encouraging Q1 report despite a sales miss

TSMC reported per-share earnings of $2.12 on sales of $25.53 billion. The average analyst estimate had targeted earnings per share of $2.06 on revenue of $25.72 billion. Despite the sales shortfall relative to the average analyst target, revenue was still up 35.3% year over year.

What's next for Taiwan Semiconductor?

TSMC's first-quarter product mix showed strong momentum for 3nm chips and semiconductors for artificial intelligence (AI) and other high-performance-computing categories. Growth for these products helps support a promising near-term outlook.

Comments from C.C. Wei, the company's CEO, denying reports that his company was in talks to enter a joint venture to help operate Intel's semiconductor foundry business may also be helping to support confidence in TSMC's trajectory today. Supporting Intel's fab business would be a costly move, and it would come at a time when the geopolitical and macroeconomic picture is in flux.

Taiwan Semiconductor's business appears to be in great shape, and it looks poised to retain clear leadership in the fab space for the foreseeable future. On the other hand, the company faces outsize geopolitical risk due to the significance that its fabs hold in global supply chains and the AI race between the U.S. and China -- and shares will likely see continued near-term volatility.