TSMC Projects 29% Revenue Growth in 2025 Driven by AI Chip Demand
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jan 01 2026
0mins
Should l Buy TSM?
Source: Fool
- Market Share Leadership: As of Q3 2024, TSMC holds a commanding 72% revenue market share in the global foundry market, significantly outpacing Samsung's 7%, which underscores its dominant position amid surging AI chip demand and solidifies its industry leadership.
- Robust Customer Demand: Nvidia's $500 billion order backlog is expected to drive TSMC's business growth, with projections indicating nearly 29% average annual earnings growth over the next few years, highlighting the company's critical role in the AI investment cycle.
- Technological Innovation Edge: TSMC is manufacturing chips for Nvidia's upcoming Rubin architecture using its advanced 3-nanometer process, which will enhance performance while reducing power consumption, further strengthening its competitive position in the high-end chip market.
- Attractive Valuation: With a price-to-earnings ratio nearing 30, TSMC appears expensive, yet its PEG ratio of approximately 1 indicates it remains attractive at current prices, suggesting investors can expect strong long-term returns.
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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: 330.730
Low
63.24
Averages
313.46
High
390.00
Current: 330.730
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 to Manufacture Advanced 3nm Chips in Japan
- Technology Upgrade: TSMC plans to build its second wafer fabrication plant in Kumamoto, Japan, to manufacture advanced 3nm chips, marking a significant advancement in its semiconductor manufacturing roadmap and aligning with Prime Minister Sanae Takaichi's technology ambitions.
- Increased Investment: The company is raising its total investment in the southern Japanese plant to ¥2.6 trillion ($17 billion), demonstrating strong confidence and long-term commitment to the semiconductor market in the region.
- Production Plan Adjustment: The original plan to produce 7nm chips by late 2027 has been upgraded to 3nm chips, reflecting TSMC's agility in responding to technological innovations and market demand changes.
- Market Impact: As a key chip supplier for Nvidia and Apple, TSMC's initiative will further solidify its leadership position in the global semiconductor industry and may accelerate the rapid development of related technologies.
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- Broadcom's ASIC Innovation: Broadcom is challenging Nvidia's dominance by designing application-specific integrated circuits (ASICs), with AI semiconductor revenue expected to double year-over-year in Q1; while these chips won't fully replace GPUs, they offer superior performance for specific workloads, potentially capturing some of Nvidia's market share.
- TSMC's Key Role: As a leading chip foundry, TSMC's unmatched manufacturing capabilities position it well in the AI space, with projected growth rates of 31% and 22% for 2023 and 2024 respectively; as AI spending continues to rise, TSMC's stock performance is worth monitoring.
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- Strong Market Demand: CEO Lisa Su stated that AMD is entering a multi-year demand super cycle for high-performance and AI computing, expecting a compound annual growth rate exceeding 35% over the next three to five years, showcasing the company's strategic positioning in the AI sector.
- Nvidia Earnings Expectations: Nvidia is projected to report a 67% year-over-year revenue increase, surpassing $65 billion, on February 25; despite concerns about high valuations and potential AI bubbles, strong demand may drive performance beyond expectations.
- Investor Sentiment Fluctuations: Although Nvidia is likely to release positive earnings, investors may react negatively in the short term due to concerns about the sustainability of AI spending, similar to AMD's situation, potentially providing long-term investors with an opportunity to buy shares at reasonable prices.
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Semiconductor ETF Soars on AI Demand and Earnings Surge
- Strong January Performance: The iShares Semiconductor ETF (SOXX) surged 12% in January, reflecting robust market confidence in the semiconductor sector, particularly driven by TSMC's earnings and soaring memory prices, highlighting the ETF's significance in diversified investments.
- Memory Price Surge: According to Trendforce, traditional DRAM prices are expected to rise by 90% to 95% compared to the previous quarter, while NAND flash prices are projected to increase by 55% to 60%, indicating strong demand from AI infrastructure development, further boosting stocks like Micron.
- TSMC Capital Expenditure Outlook: Although TSMC is not part of the SOXX ETF, its forecast for capital spending of $52 billion to $56 billion in 2026, a 40% increase from 2025, underscores the long-term growth potential of the semiconductor industry, attracting investor interest.
- Market Volatility and Outlook: Despite a 4.6% decline in SOXX in February, capital expenditure forecasts from major cloud companies have exceeded market expectations, suggesting that AI infrastructure development will continue to grow strongly in 2026, positioning semiconductor stocks to benefit from this long-term trend.
See More
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- TSMC Market Dominance: Taiwan Semiconductor Manufacturing, controlling 72% of the market as the largest chip foundry, trades at a forward P/E of 24, yet analysts project a 25% annual growth over the next three to five years, highlighting its strong performance in the AI sector.
- Uber's Self-Driving Tech Development: Uber holds about 75% of the U.S. ride-sharing market and, despite competition from Waymo and Tesla, is developing self-driving technology in partnership with Nvidia, planning to deploy 100,000 autonomous vehicles, which could drive 22% annualized long-term growth.
- Attractive Market Valuations: Despite stock fluctuations, the current valuations of Netflix, TSMC, and Uber present investment opportunities under $1,000, particularly as the market approaches historical highs, indicating their long-term potential in their respective sectors.
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- Tech-Driven Growth: Walmart's push into online shopping and the Walmart+ subscription service led to a 27% increase in global e-commerce sales in the fiscal third quarter, enhancing customer experience and bolstering the company's long-term profitability.
- Potential Industry Leaders: JPMorgan Chase and Visa are seen as the next candidates for the trillion-dollar club, with market caps nearing $864 billion and $636 billion respectively, highlighting the stability and growth potential of the financial sector.
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TSMC to Manufacture Advanced 3nm Chips in Japan
- Technology Upgrade: TSMC plans to build its second wafer fabrication plant in Kumamoto, Japan, to manufacture advanced 3nm chips, marking a significant advancement in its semiconductor manufacturing roadmap and aligning with Prime Minister Sanae Takaichi's technology ambitions.
- Increased Investment: The company is raising its total investment in the southern Japanese plant to ¥2.6 trillion ($17 billion), demonstrating strong confidence and long-term commitment to the semiconductor market in the region.
- Production Plan Adjustment: The original plan to produce 7nm chips by late 2027 has been upgraded to 3nm chips, reflecting TSMC's agility in responding to technological innovations and market demand changes.
- Market Impact: As a key chip supplier for Nvidia and Apple, TSMC's initiative will further solidify its leadership position in the global semiconductor industry and may accelerate the rapid development of related technologies.
See More
Top Four AI Beneficiary Stocks to Buy Now
- Nvidia's Market Dominance: Nvidia leads the AI sector with its GPUs, crucial for training and running AI models, and is projected to achieve a 52% growth in fiscal 2027; despite concerns over an AI bubble, its robust long-term growth potential makes it an ideal investment choice.
- Broadcom's ASIC Innovation: Broadcom is challenging Nvidia's dominance by designing application-specific integrated circuits (ASICs), with AI semiconductor revenue expected to double year-over-year in Q1; while these chips won't fully replace GPUs, they offer superior performance for specific workloads, potentially capturing some of Nvidia's market share.
- TSMC's Key Role: As a leading chip foundry, TSMC's unmatched manufacturing capabilities position it well in the AI space, with projected growth rates of 31% and 22% for 2023 and 2024 respectively; as AI spending continues to rise, TSMC's stock performance is worth monitoring.
- Microsoft's Cloud Growth: Microsoft's Azure cloud platform saw a 39% year-over-year revenue increase in Q2 of fiscal 2026; although the market reacted negatively to some quarterly results, its $625 billion backlog indicates significant future growth potential, making the current stock price dip a buying opportunity.
See More
AMD and Nvidia's AI Market Outlook
- AMD Earnings Surge: AMD reported a 34% year-over-year revenue increase, exceeding $10 billion, with gross margin rising from 51% to 54%, indicating enhanced profitability; however, the stock fell 17% post-report, reflecting market caution regarding future growth.
- Strong Market Demand: CEO Lisa Su stated that AMD is entering a multi-year demand super cycle for high-performance and AI computing, expecting a compound annual growth rate exceeding 35% over the next three to five years, showcasing the company's strategic positioning in the AI sector.
- Nvidia Earnings Expectations: Nvidia is projected to report a 67% year-over-year revenue increase, surpassing $65 billion, on February 25; despite concerns about high valuations and potential AI bubbles, strong demand may drive performance beyond expectations.
- Investor Sentiment Fluctuations: Although Nvidia is likely to release positive earnings, investors may react negatively in the short term due to concerns about the sustainability of AI spending, similar to AMD's situation, potentially providing long-term investors with an opportunity to buy shares at reasonable prices.
See More
Semiconductor ETF Soars on AI Demand and Earnings Surge
- Strong January Performance: The iShares Semiconductor ETF (SOXX) surged 12% in January, reflecting robust market confidence in the semiconductor sector, particularly driven by TSMC's earnings and soaring memory prices, highlighting the ETF's significance in diversified investments.
- Memory Price Surge: According to Trendforce, traditional DRAM prices are expected to rise by 90% to 95% compared to the previous quarter, while NAND flash prices are projected to increase by 55% to 60%, indicating strong demand from AI infrastructure development, further boosting stocks like Micron.
- TSMC Capital Expenditure Outlook: Although TSMC is not part of the SOXX ETF, its forecast for capital spending of $52 billion to $56 billion in 2026, a 40% increase from 2025, underscores the long-term growth potential of the semiconductor industry, attracting investor interest.
- Market Volatility and Outlook: Despite a 4.6% decline in SOXX in February, capital expenditure forecasts from major cloud companies have exceeded market expectations, suggesting that AI infrastructure development will continue to grow strongly in 2026, positioning semiconductor stocks to benefit from this long-term trend.
See More
Three Growth Stock Investment Opportunities
- Netflix Acquisition Plan: Netflix plans to acquire Warner Bros. Studios, HBO, and HBO Max for $82.7 billion, which may strain cash flow and increase debt; however, this could enhance its content portfolio to attract 325 million global users, driving future growth.
- TSMC Market Dominance: Taiwan Semiconductor Manufacturing, controlling 72% of the market as the largest chip foundry, trades at a forward P/E of 24, yet analysts project a 25% annual growth over the next three to five years, highlighting its strong performance in the AI sector.
- Uber's Self-Driving Tech Development: Uber holds about 75% of the U.S. ride-sharing market and, despite competition from Waymo and Tesla, is developing self-driving technology in partnership with Nvidia, planning to deploy 100,000 autonomous vehicles, which could drive 22% annualized long-term growth.
- Attractive Market Valuations: Despite stock fluctuations, the current valuations of Netflix, TSMC, and Uber present investment opportunities under $1,000, particularly as the market approaches historical highs, indicating their long-term potential in their respective sectors.
See More
Walmart Joins Trillion-Dollar Market Cap Club
- New Trillion-Dollar Member: Walmart officially surpassed a $1 trillion market cap on February 3, becoming the 13th publicly traded company globally to reach this milestone, showcasing its strong competitive edge and market influence in the retail sector.
- Tech-Driven Growth: Walmart's push into online shopping and the Walmart+ subscription service led to a 27% increase in global e-commerce sales in the fiscal third quarter, enhancing customer experience and bolstering the company's long-term profitability.
- Potential Industry Leaders: JPMorgan Chase and Visa are seen as the next candidates for the trillion-dollar club, with market caps nearing $864 billion and $636 billion respectively, highlighting the stability and growth potential of the financial sector.
- Economic Cycle Challenges: While Walmart's success is notable, fluctuations in the economic cycle may pose challenges to the growth of JPMorgan Chase and Visa, prompting investors to carefully assess the market environment's impact on financial stocks.
See More
