Surging AI Chip Demand Boosts TSMC's Performance
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1h ago
0mins
Source: NASDAQ.COM
- Market Share Increase: TSMC achieved a 72% market share in 2025, solidifying its position as the largest contract semiconductor manufacturer globally, attracting major clients like Nvidia and Broadcom, which enhances its market standing and pricing power.
- Revenue Growth Outlook: Management raised the five-year compound annual growth rate forecast from 20% to 25% starting in 2024, with capital expenditures expected to reach between $52 billion and $56 billion in 2026, a 32% increase at the midpoint, which will drive accelerated revenue growth.
- Pricing Strategy Adjustment: TSMC implemented price hikes on chips that account for about 75% of its revenue at the beginning of the year and plans annual price increases through 2029, further enhancing its profitability and competitive edge in the market.
- Valuation Attractiveness: TSMC's stock trades at less than 24 times forward earnings expectations, making it attractive compared to Broadcom and Nvidia's multiples of 41 and 32, respectively, indicating significant upside potential for 2026 despite a strong performance in 2025.
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Analyst Views on TSM
Wall Street analysts forecast TSM stock price to fall over the next 12 months. According to Wall Street analysts, the average 1-year price target for TSM is 313.46 USD with a low forecast of 63.24 USD and a high forecast of 390.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
8 Analyst Rating
7 Buy
1 Hold
0 Sell
Strong Buy
Current: 339.550
Low
63.24
Averages
313.46
High
390.00
Current: 339.550
Low
63.24
Averages
313.46
High
390.00
About TSM
Taiwan Semiconductor Manufacturing Co Ltd is a Taiwan-based integrated circuit foundry service provider. The Company is primarily engaged in integrated circuit manufacturing services. It offers advanced process technologies, specialised process solutions, advanced photomask and silicon stacking, and packaging-related technologies, while supporting a comprehensive design ecosystem. The Company's products serve diverse electronic sectors including artificial intelligence, high-performance computing, wired and wireless communications, automotive and industrial equipment, personal computing, information applications, consumer electronics, smart internet of things, and wearable devices.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
TSMC Dominates AI Chip Supply Chain with Unmatched Technology
- Surging Market Demand: TSMC is dominating the AI chip supply chain with unmatched technology and scale, which is expected to benefit from the exploding market demand and strong margins, driving long-term growth prospects.
- Investment Advisory: Despite TSMC's strong performance in the AI chip sector, it was not included in the current best stock picks by The Motley Fool Stock Advisor analyst team, indicating a cautious market sentiment regarding its future performance.
- Historical Return Comparison: Compared to Netflix and Nvidia, which were recommended in 2004 and 2005 respectively and yielded returns of $450,256 and $1,171,666, TSMC's investment potential remains underappreciated, highlighting the risks and opportunities in market selections.
- Investor Community: Joining The Motley Fool Stock Advisor provides access to the latest investment recommendations; although TSMC is not on the list, the service boasts a total return rate of 942%, significantly outperforming the S&P 500's 196%, demonstrating the effectiveness of its investment strategy.
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TSMC Stock Surges 72% in 2025 Amid AI Boom
- Market Share Dominance: TSMC achieved a 72% market share in 2025, significantly outpacing competitors like Nvidia and Broadcom, which underscores its absolute advantage in semiconductor manufacturing and attracts more major clients, thereby enhancing its revenue and investment capabilities.
- Strong Earnings Performance: TSMC's Q1 2026 earnings report indicates robust growth, with management raising its five-year compound annual growth rate outlook from 20% to 25%, suggesting substantial revenue growth potential amid surging demand for AI chips.
- Increased Capital Expenditures: Management expects capital expenditures for 2026 to range between $52 billion and $56 billion, a 32% increase at the midpoint, which will accelerate depreciation expenses but is expected to result in even faster revenue growth, further enhancing the company's profitability.
- Enhanced Pricing Power: TSMC plans annual price hikes for chips that account for 75% of its revenue through 2029, and with strong pricing power and high gross margins, it is expected to continue driving earnings growth, making the stock attractive even after significant price increases.
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