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Every AI chip, every smartphone processor, and every data center upgrade has to pass through the same tollbooth. Here is why one investor keeps buying that tollbooth without apology, and why the geopolitical risk around it changes the math less…

Every time I have extra cash, I buy more Taiwan Semiconductor Manufacturing (NYSE:TSM | TSM Price Prediction). I have stopped apologizing for it. My thesis fits in one sentence. Within five years, TSMC will work like a utility for global computing: a toll road that AI accelerators, smartphone processors and data center chips have to use, and it pays shareholders for every trip.

Why Every AI Player Pays the Toll On the third-quarter call, management said it plainly: “all the AI players are working with TSMC.” Chips at 7nm and below made up 79% of wafer revenue. Production at 2nm grew from 3% of wafer revenue in Q2 to 8% in Q3. High-performance computing now brings in 68% of revenue. The company also says “demand is still far above our capability to supply today.” I look for exactly that in a utility: a broad customer base (534 customers and 12,682 products in 2025) that keeps asking for more capacity than the company can build.

Receipts Behind My Buying Start with growth. Third-quarter revenue reached $46.72 billion, up 41.2% YoY in USD terms. Management raised its full-year 2026 outlook to around 44% growth. Its Q4 guidance of $52.3 billion to $54.3 billion works out to 58% year-over-year growth at the midpoint.

Next comes profitability. Gross margin came in at 66.4%, operating margin at 58.7% and ROE at 45.5%. EPS per ADR of $4.60 beat the $4.46 consensus.

Then there is income. The quarter produced $14.90 billion in free cash flow, and the company holds $126 billion in cash and marketable securities. The quarterly dividend rose from NT$6.00 to NT$7.00, and management says it is committed to a “sustainable and steadily increasing cash dividend per share.” Over the past ten years, the shares have returned 1543.82%.

Why My Money Skips Intel and GlobalFoundries There’s real momentum at Intel (NASDAQ:INTC). Even so, its foundry unit posted a $2.1 billion quarterly operating loss, its Q2 GAAP net loss came to $11.03 billion (mostly from a non-cash charge), and its dividend yield is 0. For a retirement account, I want income today. Specialty processes are the focus at GlobalFoundries (NASDAQ:GFS). Its Q2 revenue grew 5.81% at a 28.3% gross margin. TSMC’s margins and growth rate are both far higher.

Risk I Refuse to Ignore Taiwan is the risk that could hurt this position. European auditors call cross-strait tensions “a source of persistent insecurity” for the chip sector. Building overseas also costs money. Margin dilution from overseas fabs should increase from about 2% to 3%-4%, and 2026 capex runs $60 billion to $64 billion. The stock has fallen 8.77% over the past month.

TSMC’s expanding presence keeps the thesis intact. The second Arizona fab starts volume production in Q3 2027, and Japan gets 3nm in 2028. Those overseas costs buy geographic resilience, and I am willing to pay for that.

What Keeps My Buy Button Active N2 capacity should more than double in 2027. A14 volume production begins in 2028, and management expects it to become a bigger node. Its position is clear: “We have no intention of leaving any food on the table for others.” I plan to keep collecting the toll alongside TSMC for decades.

Contact [email protected] for any questions or corrections.

TSMC's CEO confirmed talks with SpaceX over the massive Terafab chip plant, but drew a hard line that could blow up the deal before it starts. Elon Musk has a very different idea about who runs the place.

Taiwan Semiconductor (NYSE:TSM | TSM Price Prediction) confirmed on its October 15, 2026 third-quarter earnings call that it is in talks with SpaceX (NASDAQ:SPCX) about the Terafab chip plant. CEO C.C. Wei also set one firm condition: TSMC has to operate the fab.

Wei Sets the Terms for Terafab
Wei said TSMC is “talking to one of our customers who is trying to build a fab, Terafab, let me be more specific,” and is checking whether it could use that capacity. An analyst asked whether the facility would be TSMC-owned. Wei did not commit to an ownership structure: “We are still in discussion, let me say that. Either way it would be possible.” He was clear that a Texas plant “must be run by TSMC.”

That puts him at odds with Elon Musk. Earlier this month, Musk confirmed on X that the two companies had talked, but he wrote “we will build and run the fab,” with TSMC at most subleasing part of the facility.

U.S. Customers Are Pushing TSMC Toward Texas
“We work very hard to expand our capacity in the U.S. This is necessary because most of our large customers are in the U.S., and they request TSMC to increase the capacity,” Wei said, adding, “We sent the teams to Texas to do all the evaluation.”

The numbers support his case. Third-quarter revenue reached $46.72B at a 66.4% gross margin. HPC revenue rose 22% quarter over quarter to 68% of revenue. Fourth-quarter guidance is $52.3B to $54.3B, and full-year revenue is expected to grow about 44%.

Running the Fab Protects TSMC’s Margins
Wei’s demand for operating control fits with what U.S. plants cost TSMC. Management said overseas fabs will reduce gross margin by about 2% for full-year 2026, and that hit could grow to 3%-4% over the next few years. Capex guidance remains at $60 billion to $64 billion. Wei also made clear TSMC wants every order it can get: “We have no intention to leave food on the table for others.”

SpaceX Needs More Chips
SpaceX’s need for chips is large and growing. In the second quarter, its AI segment revenue rose 247% to $2.56B, and $15.83B of its $18.37B in capex went into AI computing. On that call, Musk said, “Our understanding within NVIDIA is that we will receive a very small percentage of their GPUs next year.” All of that AI expansion still has to be powered, cooled, and networked by someone, and we rounded up seven suppliers riding that wave in a free report on the non-chip side of the AI boom.

Next Steps for Investors
Earnings per share came in at $4.60, ahead of the $4.46 consensus. Even so, TSM shares fell 3.05% to $416.90 in morning trading and are down 11.71% over the past week. SPCX fell 3.61%. Wei said TSMC has “been prudent in our business planning going into 2027.” On Terafab, he promised more details later: “If we have any solid conclusion, we will share with you.” The open question is who would run the fab, and any deal will have to settle it.

Contact [email protected] for any questions or corrections.

DUTCH ASSET Corp raised its holdings in shares of Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM – Free Report) by 5.9% during the 3rd quarter, according to the company in its most recent filing with the Securities and Exchange Commission. The fund owned 24,829 shares of the semiconductor company’s stock after purchasing an additional 1,374 shares during the period. Taiwan Semiconductor Manufacturing makes up about 5.3% of DUTCH ASSET Corp’s investment portfolio, making the stock its 4th largest holding. DUTCH ASSET Corp’s holdings in Taiwan Semiconductor Manufacturing were worth $11,327,000 at the end of the most recent quarter.

Other hedge funds have also bought and sold shares of the company. Fiduciary Advisors Inc. raised its holdings in shares of Taiwan Semiconductor Manufacturing by 200.0% during the third quarter. Fiduciary Advisors Inc. now owns 60 shares of the semiconductor company’s stock valued at $27,000 after purchasing an additional 40 shares during the last quarter. Cedar Mountain Advisors LLC lifted its stake in shares of Taiwan Semiconductor Manufacturing by 88.2% in the 2nd quarter. Cedar Mountain Advisors LLC now owns 64 shares of the semiconductor company’s stock worth $31,000 after purchasing an additional 30 shares during the period. Markowski Investments bought a new stake in shares of Taiwan Semiconductor Manufacturing during the 2nd quarter valued at $33,000. Evolution Wealth Management Inc. grew its position in shares of Taiwan Semiconductor Manufacturing by 257.7% during the 1st quarter. Evolution Wealth Management Inc. now owns 93 shares of the semiconductor company’s stock valued at $31,000 after acquiring an additional 67 shares during the period. Finally, Financial Freedom LLC bought a new position in Taiwan Semiconductor Manufacturing in the 1st quarter worth $32,000. Hedge funds and other institutional investors own 16.51% of the company’s stock.

Analysts Set New Price Targets Several research analysts recently weighed in on the stock. Needham & Company LLC upped their target price on shares of Taiwan Semiconductor Manufacturing from $530.00 to $560.00 and gave the stock a “buy” rating in a report on Thursday, October 15th. Wall Street Zen downgraded Taiwan Semiconductor Manufacturing from a “strong-buy” rating to a “buy” rating in a research note on Saturday, August 8th. Weiss Ratings cut shares of Taiwan Semiconductor Manufacturing from a “buy (b-)” rating to a “hold (c+)” rating in a research report on Tuesday, October 6th. Susquehanna upped their price objective on Taiwan Semiconductor Manufacturing from $575.00 to $600.00 and gave the company a “positive” rating in a research report on Thursday, July 16th. Finally, Stifel Nicolaus assumed coverage on shares of Taiwan Semiconductor Manufacturing in a research note on Tuesday, September 1st. They set a “buy” rating and a $515.00 price objective for the company. Three research analysts have rated the stock with a Strong Buy rating, eleven have issued a Buy rating and two have assigned a Hold rating to the company’s stock. According to data from MarketBeat, the stock has an average rating of “Buy” and a consensus price target of $528.78.

Check Out Our Latest Stock Report on TSM Insider Activity at Taiwan Semiconductor Manufacturing In related news, VP Lipen Yuan purchased 350 shares of the firm’s stock in a transaction on Tuesday, August 18th. The stock was acquired at an average price of $73.58 per share, with a total value of $25,753.00. Following the completion of the acquisition, the vice president owned 2,000 shares in the company, valued at approximately $147,160. This represents a 21.21% increase in their position. The transaction was disclosed in a document filed with the SEC, which is accessible through this link. Also, VP Bor-Zen Tien purchased 1,000 shares of the stock in a transaction on Monday, August 3rd. The shares were purchased at an average cost of $73.06 per share, with a total value of $73,060.00. Following the transaction, the vice president owned 14,051 shares in the company, valued at $1,026,566.06. This trade represents a 7.66% increase in their position. Additional details regarding this purchase are available in the official SEC disclosure. In the last three months, insiders have acquired 8,043 shares of company stock worth $598,956. 1.11% of the stock is owned by insiders.

Key Stories Impacting Taiwan Semiconductor Manufacturing Here are the key news stories impacting Taiwan Semiconductor Manufacturing this week:

Positive Sentiment: AI demand is driving strong growth. High-performance computing reportedly represented 68% of TSMC’s latest quarterly revenue, while demand for advanced chips remains well above available supply. Management has raised its forecast amid accelerating data-center and AI spending. The Most Important Number in Taiwan Semiconductor’s Earnings Report Was 68% Positive Sentiment: Analysts remain bullish following the earnings beat. Recent coverage describes TSMC’s third-quarter report as a “beat and raise,” and Zacks upgraded TSM to Rank #1, or Strong Buy. Supporters argue that the company is trading at a market-level valuation despite growth that is expected to outpace the broader market. TSMC Upgraded to Strong Buy Positive Sentiment: Expansion and customer demand support the long-term outlook. TSMC is investing billions to expand U.S. production, while Nvidia reportedly wants Samsung, Micron and SK Hynix to use TSMC’s 3-nanometer process for next-generation high-bandwidth-memory base dies. That could deepen TSMC’s role in AI-chip supply chains. A $4 Billion Reason to Buy TSMC Stock Now Neutral Sentiment: Industry growth forecasts are favorable but not an immediate catalyst. Reports project substantial expansion in FinFET, 3D-chip and wafer-foundry markets through 2030, areas where TSMC is a major participant. These forecasts reinforce the structural opportunity but do not materially change near-term earnings expectations. FinFET Technology Global Strategic Business Report Negative Sentiment: Broad AI-sector fears are limiting the rebound. Chip stocks initially sold off amid concerns about AI financing, stretched valuations and the possibility that the sector’s crowded trade could unwind. Although semiconductor shares recovered during the session, historical shakeout risks remain. Chip Stocks Shrug Off a Scary Morning Negative Sentiment: Near-term margins could face pressure. The ramp-up of TSMC’s 2-nanometer technology and overseas fabs may temporarily reduce gross margins, even though analysts view the impact as an investment-related effect rather than evidence of weakening demand. Shares of Taiwan Semiconductor Manufacturing stock opened at $425.10 on Wednesday. The company has a current ratio of 2.46, a quick ratio of 2.25 and a debt-to-equity ratio of 0.14. The stock’s fifty day moving average price is $434.78 and its 200-day moving average price is $418.99. The firm has a market cap of $2.20 trillion, a P/E ratio of 27.35, a P/E/G ratio of 0.85 and a beta of 1.37. Taiwan Semiconductor Manufacturing Company Ltd. has a 12 month low of $266.82 and a 12 month high of $487.47.

Taiwan Semiconductor Manufacturing (NYSE:TSM – Get Free Report) last posted its quarterly earnings results on Tuesday, September 8th. The semiconductor company reported $4.62 EPS for the quarter. The business had revenue of $46.87 billion during the quarter. Taiwan Semiconductor Manufacturing had a net margin of 51.51% and a return on equity of 42.84%. On average, equities research analysts expect that Taiwan Semiconductor Manufacturing Company Ltd. will post 17.03 earnings per share for the current fiscal year.

Taiwan Semiconductor Manufacturing Cuts Dividend The firm also recently declared a quarterly dividend, which will be paid on Thursday, January 7th. Shareholders of record on Thursday, December 10th will be paid a $1.0854 dividend. This represents a $4.34 dividend on an annualized basis and a yield of 1.0%. This is a drop from Taiwan Semiconductor Manufacturing’s previous quarterly dividend of $1.1136. The ex-dividend date is Thursday, December 10th. Taiwan Semiconductor Manufacturing’s dividend payout ratio (DPR) is 22.07%.

About Taiwan Semiconductor Manufacturing (Free Report)

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), commonly known as TSMC, is a dedicated semiconductor foundry headquartered in Hsinchu, Taiwan. The company manufactures integrated circuits for customers that design their own chips, allowing semiconductor, electronics, and technology companies to outsource production rather than operate their own fabrication facilities.

TSMC provides wafer fabrication services across a broad range of process technologies, including advanced nodes used in high-performance computing, smartphones, automotive systems, and artificial intelligence applications.

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Taiwan Semiconductor Manufacturing (TSM -2.28%) plans to spend $60 billion to $64 billion this year on new factories and equipment. That's a lot of cash going out the door, with capital spending totaling a third of trailing-12-month revenue. But for the world's largest chipmaker, it's a signal that more growth is coming.

On the Oct. 15 earnings call, CFO Wendell Huang tied spending to long-term demand from customers, including the emerging market for agentic AI -- autonomous software that completes tasks on its own. He also said spending from 2026 through 2028 should be significantly higher than in the previous three years.

Image source: Getty Images.

TSMC is chasing demand. Third-quarter revenue hit a record $46.7 billion, up 41% year over year, and management expects fourth-quarter revenue of $52.3 billion to $54.3 billion. CEO C.C. Wei said the gap between demand and supply remains "quite big." Huang added that if TSMC executes, revenue growth should outpace the increase in capital spending.

This is TSMC's scale at work. Even with investment in equipment to expand chipmaking capacity, it reported a stellar 51.1% profit margin in the third quarter, up from 45.7% in the year-ago quarter.

TSM Taiwan Semiconductor Manufacturing$412.61-$9.64 (-2.28%)

NYSE · As of 4:00 PM ET 10/16/26

Geopolitical risks in Asia remain. TSMC continues to invest in building new factories in Taiwan, while expanding overseas to diversify its operations. However, overseas plants in places like Arizona cost more to run and may weigh on future margins.

Still, the strong quarter and investment plans point to years of growth ahead, which makes the stock a buy for long-term investors. Taiwan Semiconductor stock is trading at 19 times 2027 earnings estimates, with the consensus estimate calling for earnings to grow 28% next year.

John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

Banque Pictet & Cie SA cut its holdings in Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM – Free Report) by 7.2% during the third quarter, according to its most recent Form 13F filing with the SEC. The fund owned 334,782 shares of the semiconductor company’s stock after selling 25,798 shares during the period. Taiwan Semiconductor Manufacturing accounts for about 1.1% of Banque Pictet & Cie SA’s portfolio, making the stock its 17th largest holding. Banque Pictet & Cie SA’s holdings in Taiwan Semiconductor Manufacturing were worth $152,733,000 at the end of the most recent quarter.

Several other hedge funds also recently added to or reduced their stakes in the business. Tiger Global Management LLC increased its holdings in Taiwan Semiconductor Manufacturing by 49.4% during the 1st quarter. Tiger Global Management LLC now owns 5,565,074 shares of the semiconductor company’s stock worth $1,880,717,000 after purchasing an additional 1,839,600 shares during the period. Invesco Ltd. boosted its stake in shares of Taiwan Semiconductor Manufacturing by 1.1% in the 4th quarter. Invesco Ltd. now owns 3,721,823 shares of the semiconductor company’s stock valued at $1,131,025,000 after buying an additional 40,842 shares during the period. Sei Investments Co. lifted its position in shares of Taiwan Semiconductor Manufacturing by 11.8% during the 1st quarter. Sei Investments Co. now owns 2,591,510 shares of the semiconductor company’s stock worth $875,802,000 after purchasing an additional 274,389 shares during the last quarter. Assenagon Asset Management S.A. lifted its position in shares of Taiwan Semiconductor Manufacturing by 67.2% during the 3rd quarter. Assenagon Asset Management S.A. now owns 1,717,515 shares of the semiconductor company’s stock worth $783,513,000 after purchasing an additional 690,523 shares during the last quarter. Finally, T. Rowe Price Investment Management Inc. lifted its position in shares of Taiwan Semiconductor Manufacturing by 168.6% during the 4th quarter. T. Rowe Price Investment Management Inc. now owns 2,093,115 shares of the semiconductor company’s stock worth $636,077,000 after purchasing an additional 1,313,917 shares during the last quarter. 16.51% of the stock is currently owned by hedge funds and other institutional investors.

Wall Street Analysts Forecast Growth A number of research firms recently commented on TSM. TD Cowen increased their target price on shares of Taiwan Semiconductor Manufacturing from $400.00 to $440.00 and gave the company a “hold” rating in a research report on Friday, July 17th. Needham & Company LLC boosted their price target on shares of Taiwan Semiconductor Manufacturing from $530.00 to $560.00 and gave the company a “buy” rating in a research report on Thursday. Zacks Research raised shares of Taiwan Semiconductor Manufacturing from a “hold” rating to a “strong-buy” rating in a research report on Thursday, July 16th. Weiss Ratings downgraded shares of Taiwan Semiconductor Manufacturing from a “buy (b-)” rating to a “hold (c+)” rating in a research note on Tuesday, October 6th. Finally, Wall Street Zen lowered Taiwan Semiconductor Manufacturing from a “strong-buy” rating to a “buy” rating in a report on Saturday, August 8th. Three equities research analysts have rated the stock with a Strong Buy rating, eleven have assigned a Buy rating and two have assigned a Hold rating to the company. According to MarketBeat, the company presently has an average rating of “Buy” and a consensus target price of $528.78.

View Our Latest Report on Taiwan Semiconductor Manufacturing Key Headlines Impacting Taiwan Semiconductor Manufacturing Here are the key news stories impacting Taiwan Semiconductor Manufacturing this week:

Positive Sentiment: Record results and strong guidance support the long-term outlook. Third-quarter net income rose 68.7% year over year to NT$763.1 billion, while revenue increased about 51% and exceeded analyst estimates. TSMC also forecast fourth-quarter revenue of $52.3 billion to $54.3 billion, well above the consensus estimate. TSMC posts record profit for a sixth straight quarter Positive Sentiment: AI demand remains the key growth driver. Advanced technologies represented 79% of wafer revenue, and management reported no signs of a slowdown in demand for AI and high-performance-computing chips. Full-year 2026 revenue growth is expected to be approximately 44%, while annual 2-nanometer capacity is projected to more than double in 2027. Three key takeaways for long-term investors Positive Sentiment: Analysts remain bullish. DA Davidson reaffirmed its Buy rating with a $500 target, while Needham raised its target to $560. Articles also highlight TSMC’s manufacturing scale and competitive moat as potential benefits from continued AI infrastructure investment. TSMC long-term investment outlook Neutral Sentiment: Capacity expansion is both an opportunity and a concern. TSMC is considering additional U.S. expansion, including potential involvement in Elon Musk’s proposed Texas “Terafab,” while Taiwan is planning Texas industrial parks for Nvidia suppliers. These projects could improve customer access and supply-chain resilience but increase execution and investment requirements. TSMC talks with Elon Musk’s Terafab Negative Sentiment: Large capital expenditures are weighing on sentiment. TSMC’s roughly $64 billion spending plan has prompted questions about returns, potential overcapacity and whether AI demand can justify the industry’s investment pace. Investors also remain concerned about AI companies’ debt financing and profitability. Why TSMC’s spending plan concerns investors Negative Sentiment: Sector-wide risk aversion is overpowering the earnings beat. Chip stocks are selling off amid inflation, higher interest rates, concerns about AI financing and questions about whether the AI boom has already been priced into valuations. Commentary also notes that TSMC’s strong results may have raised expectations too high. Chip stocks tumble on AI investment worries Insider Activity at Taiwan Semiconductor Manufacturing In other Taiwan Semiconductor Manufacturing news, VP Shyue-Shyh Lin bought 1,000 shares of the stock in a transaction that occurred on Tuesday, July 21st. The shares were purchased at an average cost of $74.13 per share, for a total transaction of $74,130.00. Following the transaction, the vice president directly owned 30,269 shares in the company, valued at $2,243,840.97. The trade was a 3.42% increase in their ownership of the stock. The purchase was disclosed in a document filed with the Securities & Exchange Commission, which is accessible through this hyperlink. Also, VP Lipen Yuan bought 350 shares of the business’s stock in a transaction on Tuesday, August 18th. The stock was purchased at an average price of $73.58 per share, with a total value of $25,753.00. Following the completion of the transaction, the vice president directly owned 2,000 shares of the company’s stock, valued at $147,160. This trade represents a 21.21% increase in their ownership of the stock. The SEC filing for this purchase provides additional information. Insiders have bought a total of 16,043 shares of company stock worth $1,185,746 in the last ninety days. 1.11% of the stock is owned by insiders.

Taiwan Semiconductor Manufacturing Stock Performance Shares of NYSE:TSM opened at $413.15 on Friday. The business has a 50-day moving average of $434.71 and a two-hundred day moving average of $417.11. The firm has a market capitalization of $2.14 trillion, a PE ratio of 26.59, a P/E/G ratio of 0.87 and a beta of 1.37. The company has a debt-to-equity ratio of 0.14, a current ratio of 2.46 and a quick ratio of 2.25. Taiwan Semiconductor Manufacturing Company Ltd. has a 12 month low of $266.82 and a 12 month high of $487.47.

Taiwan Semiconductor Manufacturing (NYSE:TSM – Get Free Report) last issued its quarterly earnings data on Tuesday, September 8th. The semiconductor company reported $4.62 earnings per share (EPS) for the quarter. Taiwan Semiconductor Manufacturing had a net margin of 51.51% and a return on equity of 42.84%. The company had revenue of $46.87 billion during the quarter. As a group, research analysts forecast that Taiwan Semiconductor Manufacturing Company Ltd. will post 16.65 earnings per share for the current year.

Taiwan Semiconductor Manufacturing Cuts Dividend The company also recently disclosed a quarterly dividend, which will be paid on Thursday, January 7th. Investors of record on Thursday, December 10th will be issued a $1.0854 dividend. This is a drop from Taiwan Semiconductor Manufacturing’s previous quarterly dividend of $1.1136. The ex-dividend date of this dividend is Thursday, December 10th. This represents a $4.34 dividend on an annualized basis and a dividend yield of 1.1%. Taiwan Semiconductor Manufacturing’s dividend payout ratio is 24.96%.

(Free Report)

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), commonly known as TSMC, is a Taiwan-based semiconductor manufacturer and the world’s largest dedicated semiconductor foundry. Founded in 1987 by Morris Chang, the company pioneered the pure-play foundry model, producing chips designed by other companies rather than selling products under its own semiconductor brand.

TSMC manufactures a broad range of integrated circuits, including advanced logic chips used in high-performance computing, smartphones, automotive systems, communications equipment, and consumer electronics.

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As Taiwan Semiconductor Manufacturing Co.'s record quarter makes clear, demand from chipmakers shows no sign of slowing down. In fact, TSMC can't manufacture quickly enough.

The artificial intelligence boom has created unending need for space on factory lines at the world's leading chip manufacturer, and it could put a chokehold on the entire industry's ability to scale. Last year, TSMC said it had the capacity to make more than 17 million 12-inch equivalent wafers. But customers want more.

"The competition is extremely fierce," said Jordan Klein, an analyst at Mizuho Securities. "It's a game of who can get the most leverage and supply."

TSMC makes the vast majority of the world's most advanced semiconductors, the graphics processors and central processors from Nvidia, AMD and Broadcom that are necessary for running AI workloads. Now a growing number of tech firms – Apple, Google, Amazon, Microsoft, Meta and OpenAI – also rely on TSMC to make custom in-house AI accelerators.

TSMC North American CEO Sajiv Dalal told CNBC he gets at least 10 calls a day about wafer capacity. TSMC posted record profit for a sixth straight quarter on Thursday and expects fourth-quarter revenue to be 58% higher than a year earlier, driven by strong demand for its advanced chipmaking technologies.

If compute demand continues to grow at the current rate over the next 12 to 18 months, Klein said capacity constraints at TSMC could threaten some of the industry's massive infrastructure investments and the "aggressive revenue growth targets" from the AI companies. U.S. hyperscalers are projecting well over $700 billion in capital expenditures this year, and analysts expect that figure to jump in 2027.

AI ambitions are also threatened by a global shortage of memory chips. The logic chips that TSMC manufactures are more complex and expensive to produce. That means GPU and CPU leaders like Nvidia and AMD work out lengthy contracts and bespoke deals with TSMC behind closed doors years in advance. Nvidia CEO Jensen Huang and AMD CEO Lisa Su have both visited Taiwan multiple times this year.

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Sid Sheth, CEO of AI chip startup D-Matrix, has fostered a relationship with TSMC for more than 20 years, and his company relies on TSMC to manufacture its processors.

For TSMC customers, many roads lead to Kevin Zhang, a senior vice president of the Taiwanese company and a central figure in determining which chipmakers get access to its coveted factory lines.

He's "currently probably the most popular person on the planet," Sheth said in an interview. Sheth said that Jerry Qubain, D-Matrix's vice president of manufacturing, has been visiting TSMC since 1992 and goes to Taiwan three to four times a year.

"This was even before Nvidia was founded," Sheth said. "That's a good example of a person we brought on board because of the relationships he has at TSMC." Qubain joined D-Matrix in 2024. TSMC declined to participate in this story.

Betting on startupsTSMC had 534 customers in 2025. While it doesn't name or rank them, its top 10 customers accounted for 78% of net revenue, with its top two bringing in 19% and 17%, respectively.

That leaves startups competing for capacity against customers with far bigger orders. Sheth said TSMC is "selective," but has an incentive to back promising newcomers.

"They were very supportive of Nvidia and Broadcom when they were very young companies, and now these are their biggest customers today," Sheth said. "They want to see a repeat of that."

TSMC is hustling to bring much more capacity online, with new fabs in Taiwan, Japan and Arizona — it's making advanced chips in the U.S. for the first time. In July, TSMC announced it was adding $100 billion and "several more" fabs to the six planned in Arizona, bringing its total commitment to $265 billion. TSMC is also reportedly considering an entirely new fab location in Texas.

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All of this will take years to come online. In the meantime, analysts say TSMC is adding tools like ASML's extreme ultraviolet lithography machines to existing factories to ramp up capacity. ASML smashed profit expectations in its earnings report Wednesday and said customers are interested in placing orders through 2030.

TSMC isn't the only option. Capacity constraints create an opening for the other two leading advanced chip manufacturers, Samsung and Intel, to win customers.

"People want a second source to be able to twist TSMC's arm and keep them honest on pricing," Dan Hutcheson, an analyst at TechInsights, told CNBC.

That second source might be Intel, the only U.S.-based advanced logic manufacturer. Although its foundry business has been struggling with delays and setbacks for years, Hutcheson says all the big chipmakers are now testing there.

Trade association SEMI expects 102 new chip fabs will come online globally by 2029, including 15 in the U.S. and 78 in Asia. China is the primary growth engine, expected to nearly triple capacity by 2030. In a race to catch up, American fab investments are projected to more than double by 2029.

With an increasing Arizona presence and "extremely fierce" competition for wafer capacity, Klein says TSMC is "one of the best strategically positioned companies on the face of the planet."

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Philippe Laffont has made a name for himself as someone capable of spotting secular technology trends early and making big bets on some of the biggest potential beneficiaries. That makes his hedge fund, Coatue Management, a useful source of potentially great investment ideas in tech stocks.

Laffont has held the same artificial intelligence (AI) stock at the top of Coatue's portfolio throughout 2026, and he has good reason to keep it as the fund's biggest holding. Taiwan Semiconductor Manufacturing (TSM -3.40%) accounts for nearly 9% of Coatue's publicly traded U.S. equities. While the stock has performed well for Phillipe Laffont and anyone else who owns it, it could still climb a lot higher from here.

Here's what a $10,000 investment in TSMC could be worth by 2030.

Image source: Getty Images.

Going up the supply chain
It's worth noting that Laffont holds a lot of semiconductor stocks for Coatue. The massive spending on artificial intelligence is driving a significant cash transfer from hyperscalers to chipmakers, benefiting many companies. Having said that, Laffont also likes most hyperscalers, as they have the potential to generate strong returns on their enormous capital outlays.

Laffont's largest positions, however, are mostly higher up the supply chain. TSMC is the world's largest third-party semiconductor manufacturer. It buys equipment from Lam Research and Applied Materials, both of which sat in Coatue's top-five holdings as of the end of June. He also holds a significant position in Micron Technology, which handles manufacturing in-house, exercising greater control over supply and benefiting from vertical integration.

Laffont appears to see better value higher up in the semiconductor supply chain than in chipmakers themselves or in end customers like hyperscalers or neoclouds. Despite high growth expectations for chip designers, TSMC may be best positioned to deliver sustainable earnings growth over the long run.

The center of the semiconductor industry
TSMC holds a dominant position in third-party semiconductor fabrication, especially among the world's most advanced logic chips like GPUs or custom AI accelerators. Those chips require the most advanced fabrication processes to achieve better price performance. At the scale of AI, every small improvement in efficiency creates a huge difference in how much it costs to run a data center.

TSMC ended the second quarter with an estimated 73% market share, and that number has steadily climbed over the last few years. It could keep climbing as AI spending doesn't appear to be slowing anytime soon, and TSMC is investing heavily to add new production capacity.

The demand for advanced chips, combined with its technology lead and capacity constraints, has allowed it to raise prices. It plans to keep raising prices on existing technologies through 2029 while it ramps up production of its newest generation, N2, and starts production of its next-generation processes.

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TSMC should be able to maintain its market share thanks to its close relationships with existing customers, its technology lead, and its capacity. That ensures it generates more revenue than its competitors, giving it more cash to reinvest in R&D to maintain its technology lead and build more production capacity.

Management previously forecast compound annual revenue growth of 25% between 2024 and 2029. That forecast may be conservative, given its 2026 revenue growth of above 35% through the first half of the year and 36% in 2025.

TSMC could maintain its 25% target growth rate through 2029, fueled by higher prices for older technology and a rapid ramp-up of its current and next-generation production processes. That should prevent much change in its gross margin profile, and net income could climb even faster than revenue, as it generates strong returns on its R&D spending and keeps capital spending in line with demand.

How much TSMC stock could climb will depend, in part, on how long the current earnings cycle lasts. While management works closely with its customers to ensure it doesn't overbuild, it's still subject to the semiconductor industry's swings. On average, the company commands a price multiple of 20-25 times earnings. At a 25% earnings growth rate through 2030, that puts its total return somewhere between 52% and 90%, based on the stock price as of this writing. That means $10,000 invested in TSMC today could be worth between $15,200 and $19,000 by 2030.

Taiwan Semiconductor Manufacturing (TSM +0.17%) has been one of the best-performing big tech stocks over the past three years, up 380%. That's better than every "Magnificent Seven" stock in that time, and it hasn't shown many signs of slowing down. As of this writing, it's up over 45% for the year.

Although it's not often considered a typical AI stock, TSMC's latest run is largely driven by the ongoing AI boom. As the world's largest semiconductor (chip) foundry, TSMC is as valuable to the AI ecosystem as virtually any company in the mix. And that's why I'm confident a $5,000 investment in the stock could grow to $8,000 by 2030. Let's take a deeper dive.

Image source: The Motley Fool.

So, what exactly does TSMC do?
TSMC is the go-to chip manufacturing company for many of the electronics we use daily. While companies like Apple design their iPhone chips, Nvidia designs chips for its data center hardware, and Broadcom designs chips for its networking equipment, they all rely on TSMC to actually manufacture them.

No company has TSMC's expertise, results, and scale, so it's in a league of its own. It has a 73% market share in the foundry market, but its share of advanced AI chips is well into the upper 90% range. It has been using that to its advantage, too.

The data centers that AI hyperscalers like Amazon, Microsoft, Alphabet, and Meta Platforms are spending trillions to build are filled with advanced chips made by TSMC. So, no matter which of those companies pulls ahead in the AI race, TSMC will continue to benefit. That's a lucrative position to be in.

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Profits continue to flow
TSMC's virtual monopoly has given it lots of pricing power. Companies either pay a premium for chips they know will be high-performance and meet the required scale, or go with a less efficient alternative and risk performance. TSMC's market shows which option companies generally choose.

Its revenue growth over the past few years has been impressive (up 33.7% year over year in the second quarter), but earnings growth has been even more explosive.

TSM Revenue (Quarterly) data by YCharts

Over the same three-year span, its gross margin rose from 54.1% to 67.7%, operating margin from 42% to 60.3%, and net profit margin from 37.8% to 55.6%.

How much a $5,000 investment could be worth by 2030
For illustration, let's assume TSMC's stock price remains flat through the rest of 2026. That means the stock would need to grow 60% from 2027 to 2030, averaging 17% returns per year. Right now, TSMC is a $2.3 trillion company trading at 26.5 times its projected 2027 earnings, which is on the high end of its average over the past three years.

If we assume this holds steady over three years, TSMC would need to grow its earnings per share (EPS) by around 15.6% annually. That's more than feasible for a company that has grown by 198% over the past three years. Current estimates put TSMC's year-over-year EPS growth well above that for the next couple of years, but even if it cuts back modestly to 20% after, a $5,000 investment can easily grow to $8,000. And 20% is on the low end of what I expect the growth to be.

AI is fueling TSMC's current momentum, but its business goes beyond that. Even if AI momentum slows over the next three or so years, TSMC's business is broad and deep enough to keep thriving. Margins would likely take a hit, but I don't imagine the company or investors would harp on it too much.

We can't predict how stock prices will move -- and good business or financial performance doesn't guarantee good stock price performance -- but I think TSMC's stock still has enough momentum to turn $5,000 into $8,000 by 2030.

Stefon Walters has positions in Apple, Microsoft, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Broadcom, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

Taiwan Semiconductor Manufacturing Company (TSM -1.98%) is the company behind the world's most advanced semiconductors. The largest third-party chip manufacturer has been one of the biggest beneficiaries of booming artificial intelligence (AI) spending, and that doesn't seem to be slowing down anytime soon.

TSMC's September revenue release showed accelerating sales growth, with the third quarter coming in above management's guidance and analysts' expectations. Here's what's driving the revenue growth for TSMC and why it's my top AI chip stock to buy.

Image source: Taiwan Semiconductor Manufacturing.

What's behind TSMC's rapid revenue growth? TSMC reports monthly sales figures in New Taiwan dollars (NTD) shortly after the end of each month. September sales reached NT512 billion, up 55% year over year. Total third-quarter sales reached NT1.49 trillion, up 51%. However, the New Taiwan dollar lost value relative to the U.S. dollar over the past year, inflating those growth rates. Still, at an exchange rate of 32 NTD to USD, that translates into revenue of about $46.7 billion in revenue for the quarter, up 41% from a year ago and accelerating from 34% growth in Q2.

That number tops both analysts' expectations and TSMC's own internal forecast for revenue between $44.6 billion and $45.8 billion. Management also expected gross margin to come in between 65% and 67% and operating margin between 56% and 58%. Both represent contractions from Q2 but remain close to record levels for the company. We'll have to wait until next week for TSMC to reveal the full earnings results.

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There are several significant factors driving TSMC's revenue growth.

First and foremost is the robust demand for AI-related chips. As mentioned, chipmakers rely on TSMC's manufacturing technology to develop the world's most advanced chips, which has led to booming demand for the company.

Second, TSMC quickly ramped up its 2-nanometer (2nm) production process last quarter. The technology accounted for just 3% of revenue in Q2, but that should climb quickly. While that could result in some margin pressure on the business, TSMC is reportedly charging premium pricing for its newest production node, which should offset much of it. What's more, a faster ramp means tooling utilization increases faster, reducing pressure on margins.

Beyond 2nm, pricing is well above existing processes, and management reportedly increased pricing at the start of the year for most of its chips. It plans to continue raising prices every year through at least 2029, with expectations to raise prices 10% at the start of next year.

The last piece of the revenue growth formula is TSMC's massive capacity increases. TSMC has spent heavily on capital expenditure (capex) to meet the demand of AI chip designers that contract with it. That's enabled it to bring more capacity online, and it's actually accelerated its 2nm capacity build-out for 2026. It has plans to spend hundreds of billions on new facilities in Arizona, and it's also exploring building in Texas to diversify from the geopolitical risk of its Asian facilities.

What makes TSMC such a compelling investment is that it's built a wide moat that's enabled it to take market share from competitors despite already dominating the third-party chip manufacturing space. It's unlikely a company like Nvidia or Apple will be able to move a significant amount of work away from TSMC to negatively impact its growth at any point in the future. Nor is it likely they'll want to in the first place.

TSMC benefits from a virtuous cycle. As the world's largest chip fabricator, it generates a large amount of revenue relative to its peers. It can use that revenue to reinvest in research and development and additional capacity. That ensures its technology remains best in class, and it has the capacity to fulfill the growing number of orders from its chip design partners.

Importantly, TSMC is relatively agnostic about who designs the chips it makes. While Nvidia rules the roost today, it might not always be the biggest designer for AI chips. Custom silicon is growing in popularity among the hyperscalers. Regardless of who designs the chips, TSMC will be the company manufacturing them.

That gives me confidence in management's long-term revenue growth outlook of 25% average annualized sales growth between 2024 and 2029. Management is well ahead of that target, and CEO C.C. Wei suggested that number will increase once again when TSMC next updates its guidance.

With Taiwan Semiconductor stock trading for just 27 times earnings, it looks like a bargain. Revenue can grow in the mid-20s for a long time, and earnings growth should significantly outpace that level thanks to price increases protected by its wide moat.

SummaryTaiwan Semiconductor Manufacturing Company Limited aka TSMC continues to benefit from powerful AI tailwinds, yet a closer look reveals a more nuanced risk-reward profile than many investors assume.Another strong quarter appears increasingly likely, but the real investment debate may have little to do with the headline numbers.With optimism running high and expectations even higher, TSM investors may want to examine what truly matters beyond the next earnings report.Looking for a helping hand in the market? Members of iREIT®+HOYA Capital get exclusive ideas and guidance to navigate any climate. Learn More » Getty Images

Introduction If you have spent at least an hour in the past two years identifying key names positively impacted by the AI buildout, it is almost impossible that you have not put Taiwan Semiconductor Manufacturing Company Limited (

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Analyst’s Disclosure: I/we have a beneficial long position in the shares of MU either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

After years of being a theoretical, futuristic idea, artificial intelligence (AI) took the world by storm when OpenAI launched ChatGPT in 2022. Since then, companies that drive AI development have become market darlings, and investors are searching for the next major trend. It started with the big players like Nvidia and Broadcom, moved into data center and energy companies like CoreWeave and Bloom Energy, and more recently has centered around memory powerhouses like Sandisk and Micron.

However, there's one fantastic AI giant that is a critical part of the powerhouse, is growing fast, and is highly profitable, but is often left out of the conversation: Taiwan Semiconductor (TSM -1.02%). Taiwan Semi, or TSMC, stock has gained 689% since ChatGPT was launched, and there's plenty of upside.

TSMC's role in AI TSMC is a foundry, and it fabricates the chips according to clients' designs, which means it makes the physical components. It has partnerships with all of the top semiconductor companies, including Nvidia, Broadcom, and Amazon, as well as with other tech giants like Apple. It has a dominant position in semiconductor manufacturing, and it benefits from all of its clients' growth. So instead of deciding to bet on Nvidia or Intel, for example, an investment in TSMC bets on both.

Image source: Taiwan Semiconductor.

AI has led to incredible growth overall, and management is expecting it to continue. CEO C.C. Wei noted extremely positive signals from its AI hyperscaler clients and said that management's "conviction in the multi-year AI megatrend remain[s] very high."

Since the company serves so many clients in varied areas, it benefits from all kinds of AI growth. Nvidia is mostly known for its graphics processing units (GPUs), which have the processing power to handle high AI needs, but TSMC makes the central processing units (CPUs) that have put Intel back in the spotlight for the role they play in agentic AI.

In the second quarter, revenue increased 34% year over year, beating guidance. Gross margin improved by 1.5 percentage points to 67.7%, and operating margin improved by 2.2 percentage points to 60.3%.

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The company is investing for the future by opening new locations, including entering the U.S. last year. It has an operating facility in Arizona. This helps it avoid tariffs and be closer to many of its biggest clients, like Nvidia and Apple, both of which are headquartered in California.

Management is anticipating some short-term gross margin pressure from all of its investments, but CFO Wendell Huang noted that "a higher level of capital expenditures is always correlated to higher growth opportunities in following years."

As AI continues to develop, a bet on TSMC is a low-risk and high-opportunity play that should reward investors for years to come.

Jennifer Saibil has positions in Apple and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Amazon, Apple, Bloom Energy, Broadcom, Intel, Micron Technology, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

The artificial intelligence (AI) boom has created plenty of winners, but few companies occupy a position quite like Taiwan Semiconductor Manufacturing (TSM -1.28%). Taiwan Semi doesn't design the GPUs powering large language models (LLMs). Instead, it manufactures the advanced chips designed by companies such as Nvidia, Advanced Micro Devices, Apple, and many others.

This role makes TSMC something like a factory supporting the AI infrastructure revolution. On Oct. 8, Taiwan Semi reported revenue figures for September, underscoring to investors just how valuable the company's position is.

With September's results now published, investors have a clearer picture of what to expect when Taiwan Semi reports third-quarter earnings on Oct. 15. The numbers suggest another monster quarter could be coming.

Image source: Taiwan Semiconductor Manufacturing.

TSMC is the manufacturing backbone of AI Taiwan Semi's biggest competitive advantage is simple: Manufacturing cutting-edge semiconductors is incredibly difficult. The company spent decades refining its manufacturing processes while investing enormous sums of money into sophisticated fabrication facilities.

The company's lead is enormous. At the end of the second quarter, TSMC controlled approximately 72.5% of the global semiconductor foundry market, according to TrendForce. Samsung ranked a distant second with just 5.9%.

Demand for Nvidia GPUs, AMD accelerators, memory solutions from Micron Technology, and custom chips designed by hyperscalers such as Amazon, Alphabet, Meta Platforms, and Microsoft is keeping Taiwan Semi's manufacturing capacity busy.

TSMC's latest financial results prove just how strong AI-driven demand is becoming. The company generated approximately $14.6 billion in July revenue, followed by $16.1 billion in August and $16 billion in September. That's nearly $1 billion above the high end of management's guidance and roughly $1.4 billion ahead of analyst expectations.

In total, third-quarter revenue should land around $46.7 billion, up from $33.1 billion during the same period last year. That's roughly 41% growth when measured in U.S. dollars. Of note, revenue acceleration does not guarantee a beat on earnings. Profitability depends on manufacturing costs, product mix, and operating expenses.

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What catalysts does TSMC have? The first catalyst I see for Taiwan Semi simply revolves around the unprecedented amount of money being poured into AI infrastructure. Goldman Sachs estimates the largest U.S. hyperscalers will spend approximately $800 billion on capital expenditures (capex) in 2026, potentially rising to $1.2 trillion in 2027 and $1.4 trillion in 2028. Meanwhile, McKinsey estimates $5.2 trillion of cumulative investment will be required globally for AI data centers through 2030.

Of course, not all of that spending will go toward semiconductors. Data centers also require power systems, cooling equipment, networking, and real estate. But the processors powering those facilities increasingly depend on TSMC's manufacturing technologies. That's an enormous secular tailwind for the foundry business.

The second catalyst involves Elon Musk. Musk recently confirmed discussions between Taiwan Semi and Terafab, the semiconductor manufacturing initiative being developed by Tesla and Space Exploration Technologies. He clarified that Tesla and SpaceX are going to own and operate the facility, but TSMC could potentially sublease part of it. Although nothing is finalized, the discussions demonstrate how valuable Taiwan Semi's manufacturing expertise has become to the AI chip value chain.

Should you buy Taiwan Semi stock before earnings? The chart below illustrates Taiwan Semi's stock price throughout the AI revolution. Earnings dates are annotated by the purple circles with the letter "E" in the center.

TSM data by YCharts

Notice how the stock hasn't always celebrated around the time of an earnings report. Does this mean TSMC will fall after Oct. 15? Not necessarily.

Sometimes momentum investors buy stocks ahead of earnings, pushing expectations so high that even an excellent quarter fails to generate a rally. Other times, stronger-than-expected guidance sends shares higher. The patterns in the chart above do not establish a reliable trajectory of pre-earnings rallies followed by sell-offs. It simply illustrates how unpredictable short-term reactions can be.

If you zoom out, the picture changes drastically. Despite occasional post-earnings declines, Taiwan Semi stock has appreciated substantially over the past several years as demand for advanced semiconductors accelerated. That's the distinction investors should remember.

The company's long-term outlook is supported by enormous AI infrastructure investments and growing demand for advanced manufacturing. Rather than trying to predict a specific reaction around one earnings event, long-term investors are better served accumulating TSMC shares over a multiyear horizon.

To me, Taiwan Semi is one of the most compelling semiconductor stocks of the AI infrastructure era. History suggests meaningful gains could be in store for investors willing to buy and hold over the next several years.

Adam Spatacco has positions in Alphabet, Amazon, Microsoft, Nvidia, and Tesla. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Goldman Sachs Group, Meta Platforms, Micron Technology, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool has a disclosure policy.

Taiwan Semiconductor Manufacturing Co (ADR) (NYSE:TSM), the Taiwanese chipmaker, reported September sales of NT$511.86 billion, down 0.6% from August but up 54.6% year on year, according to Wedbush.

Third-quarter sales reached NT$1.494 trillion, up 17.6% from the previous quarter and 50.9% year on year, beating Wedbush's NT$1.446 trillion estimate and consensus of NT$1.452 trillion by about 3%.

The result also exceeded the high end of Street estimates of NT$1.483 trillion and was about 2% above the high end of TSMC's guidance range of $44.6 billion to $45.8 billion.

Wedbush said the quarterly result was broadly in line with expectations and maintained its view that TSMC should meet or exceed its second-half forecasts, with the key question being the size of any upside.

For the fourth quarter, Wedbush expects revenue of NT$1.599 trillion, implying about 7% growth from the third quarter and slightly above consensus of NT$1.593 trillion.

The broker said stronger third-quarter revenue could carry into the fourth quarter, potentially supporting annual revenue growth in the mid-40% range for 2026, compared with TSMC's previous forecast of more than 40%.

Wedbush also expects TSMC to provide more detail on its longer-term high-performance computing outlook and 2027 prospects, although the company typically does not discuss the following year in detail.

The broker expects TSMC to raise prices by 5% to 10% from the start of 2027, alongside continued strong demand for artificial intelligence chips.

The New Taiwan dollar averaged 31.73 against the US dollar in September, strengthening 0.9% from August, while third-quarter currency movements were broadly in line with TSMC's assumptions.

Globalfoundries Inc (NASDAQ:GFS) shares rose over 3% to $49.86 on Thursday morning after the semiconductor manufacturer announced a multiyear agreement with TSMC valued at $2 billion to expand US production of advanced packaging components.

The agreement will see GlobalFoundries add manufacturing capacity at its Malta, New York, facility to supply silicon interposers for TSMC’s CoWoS advanced packaging technology, which is increasingly used for AI and high-performance computing systems.

GlobalFoundries said the deal will establish the first US-based source of silicon interposers for TSMC’s CoWoS ecosystem, providing additional capacity and supply-chain flexibility as demand for AI infrastructure grows.

The company expects volume production to begin ramping at the Malta facility during the first half of 2028, with the initial agreement running for five years.

The deal is significant for GlobalFoundries because advanced packaging has become increasingly important in combining high-performance chips and improving their power efficiency for AI applications.

GlobalFoundries will also manufacture components incorporating embedded deep trench capacitors, expanding the range of advanced packaging elements it can produce at its US facility.

The agreement provides a framework for further capacity expansion as customer demand increases, potentially giving GlobalFoundries a larger role in the US supply chain supporting advanced AI computing.

GlobalFoundries said the expanded manufacturing footprint would provide greater scale and flexibility across multiple generations of advanced packaging technology.

Every GPU that powers a model training cluster has to be built somewhere, and that somewhere is almost always a fab operated by Taiwan Semiconductor Manufacturing (TSM -0.41%). Taiwan Semi does not design the artificial intelligence (AI) chips that get the headlines. Instead, the company manufactures them at nodes no one else can reliably hit at scale.

That quiet competitive advantage has turned TSMC into the physical backbone of the AI infrastructure buildout. Nevertheless, the conversation still seems to start and end with Nvidia (NVDA +0.70%), Advanced Micro Devices (AMD +3.92%), or Micron Technology (MU +0.21%). The foundry that is actually printing the silicon rarely gets the same amount of airtime.

This gap is strange once you understand how the AI chip stack works. While designers continue to fight over architecture and software, the constraint that decides how many of those designs actually ship is advanced-node capacity -- and TSMC owns most of that market.

Image source: Getty Images.

The foundry actually supporting the AI chip stack Nvidia and AMD design GPUs while Micron builds memory solutions layered alongside these chips. None of these companies do all of the manufacturing work to bring their products to life, however. TSMC holds roughly 73% of the pure-play foundry market as measured by revenue and reportedly closer to 90% of the market for the most advanced nodes.

For years, Apple was credited as TSMC's largest customer. However, Nvidia took over that title earlier this year. This shift directly tracks the AI infrastructure cycle. High-performance computing, the area that covers AI accelerators and related server silicon, has become Taiwan Semi's core growth engine.

The company's management points to AI-accelerator revenue compounding in the mid-to-high 50% range through the end of the decade, and lifted its longer-term company revenue growth outlook toward at least 25%.

While competition from Samsung and Intel exist, both companies are spending heavily on scaling foundry operations and neither company is yet to close the gap on the yield and volume at nodes Nvidia and AMD actually need for current and next-generation accelerators.

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Taiwan Semi's growth is structural TSMC's financial growth supports the idea that the AI infrastructure supercycle is more than a temporary surge. Full-year 2025 revenue reached about $122 billion, up nearly 36% year over year. Meanwhile, gross margin climbed to 60% from 56% percent the year before. Through the first half of 2026, Taiwan Semi's revenue grew 37% year over year to $76.1 billion while while gross margin expanded into the mid-60% range, underscoring the level of pricing power the company commands right now.

The company is also spending heavily on capital expenditures (capex) to help stay ahead of demand. Rising infrastructure spend might look expensive in any single year, but over a multi-year AI buildout it is what keeps the company's moat intact. Customers cannot easily dual-source manufacturing for leading edge nodes. This makes Taiwan Semi's revenue and profit tailwinds tied to the duration of the infrastructure supercycle itself rather than to one specific product launch.

Taiwan Semi stock could be poised for a run The chart below illustrates how investors are treating TSMC as a picks-and-shovels name that should trade at a discount to some of the primary chip designers. Trailing price-to-earnings (P/E) puts the stock near 34 times, which looks rich upon first glance. But on a forward P/E basis, Taiwan Semi is a different story. While the company's forward P/E of 28 is not a deep-value multiple per se, it is also not stretched against a company still expected to grow revenue by a high double-digit percent range and compound earnings as margins hold.

TSM PE Ratio data by YCharts

Nvidia and AMD capture more of the narrative premium because their products are visible. For the time being, Micron will ride the memory upcycle that AI also requires. Taiwan Semi sits underneath all of them.

While geopolitical risk around Taiwan is an obvious factor to consider, in addition to the cost of building fabs here in the U.S., they do not erase a foundry position that remains the hardest part of the AI supply chain to replicate. On a forward earnings valuation basis, I think TSMC stock still looks like a strong candidate to buy and hold throughout the AI infrastructure era.

Adam Spatacco has positions in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Broadcom, Intel, Micron Technology, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

When ranking the best artificial intelligence (AI) stocks to buy, Taiwan Semiconductor (TSM +2.75%) should make the list. Few companies are universally expected to benefit from AI as much as TSMC is, which vaults it to the top of the best AI stocks to buy right now.

So, why is TSMC among the best players to invest in within the chip sector? Its scale is unmatched.

Image source: Taiwan Semiconductor Manufacturing.

There are no replacements for Taiwan Semiconductor Taiwan Semiconductor is a chip foundry, which means it takes chip designs from its clients and produces them. TSMC's customers range from Nvidia to AMD to Apple and just about every company in between.

Taiwan Semiconductor has always had leading technology, but what really sets it apart from other foundries is its sheer size. So, even if one of these clients wanted to switch to a different foundry, they would only be able to do it in increments or not at all, because there's just no other company on Earth that has the production capabilities that TSMC has. This locks it into a fairly sizable market share and positions it well to capitalize on the massive surge in chip demand for AI computing.

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Another factor, as mentioned earlier, is that TSMC supplies chips to Nvidia and AMD. These two companies compete for data center market share, and they aren't the only firms TSMC makes chips for in the AI computing realm. There are countless cases of TSMC making chips for competitors, and that just shows the universality of TSMC as an AI and tech investment.

TSMC is clearly a winner from this standpoint, but how is it doing as an investment? During its latest quarters, TSMC's revenue and profits have risen at a pretty respectable pace.

TSM Revenue (Quarterly YoY Growth) data by YCharts

However, if you follow other AI firms (like Nvidia or AMD), you also know that these growth rates are a lot slower than what those two are experiencing. So, I think this makes TSMC a good AI stock to own, not a great one.

The reality is, other AI stocks offer far more upside than Taiwan Semiconductor. It just isn't growing fast enough to compare to some of its clients. However, if you're looking for a company that will still produce market-crushing returns and will be nearly guaranteed to do so, then it could be a fantastic investment for you.

Keithen Drury has positions in Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

TSMC (TSM - Free Report) closed the most recent trading day at $472.78, moving +2.96% from the previous trading session. The stock outpaced the S&P 500's daily gain of 0.73%. At the same time, the Dow added 0.49%, and the tech-heavy Nasdaq gained 1.19%.

The stock of chip company has risen by 10.12% in the past month, leading the Computer and Technology sector's gain of 6.36% and the S&P 500's gain of 0.55%.

The upcoming earnings release of TSMC will be of great interest to investors. The company's earnings report is expected on October 15, 2026. The company's upcoming EPS is projected at $4.45, signifying a 52.40% increase compared to the same quarter of the previous year. Meanwhile, our latest consensus estimate is calling for revenue of $45.62 billion, up 37.83% from the prior-year quarter.

For the full year, the Zacks Consensus Estimates project earnings of $16.56 per share and a revenue of $167.92 billion, demonstrating changes of +55.49% and +37.17%, respectively, from the preceding year.

Investors might also notice recent changes to analyst estimates for TSMC. These revisions help to show the ever-changing nature of near-term business trends. As a result, upbeat changes in estimates indicate analysts' favorable outlook on the business health and profitability.

Our research demonstrates that these adjustments in estimates directly associate with imminent stock price performance. To utilize this, we have created the Zacks Rank, a proprietary model that integrates these estimate changes and provides a functional rating system.

The Zacks Rank system, stretching from #1 (Strong Buy) to #5 (Strong Sell), has a noteworthy track record of outperforming, validated by third-party audits, with stocks rated #1 producing an average annual return of +25% since the year 1988. The Zacks Consensus EPS estimate has moved 0.27% higher within the past month. Right now, TSMC possesses a Zacks Rank of #2 (Buy).

From a valuation perspective, TSMC is currently exchanging hands at a Forward P/E ratio of 27.73. For comparison, its industry has an average Forward P/E of 27.73, which means TSMC is trading at no noticeable deviation to the group.

Investors should also note that TSM has a PEG ratio of 1.02 right now. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. The Semiconductor - Circuit Foundry industry currently had an average PEG ratio of 1.02 as of yesterday's close.

The Semiconductor - Circuit Foundry industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 7, putting it in the top 3% of all 250+ industries.

The Zacks Industry Rank evaluates the power of our distinct industry groups by determining the average Zacks Rank of the individual stocks forming the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to use Zacks.com to monitor all these stock-influencing metrics, and more, throughout the forthcoming trading sessions.

The logo of Taiwan Semiconductor Manufacturing Company (TSMC) at the company's second-quarter earnings conference in Taipei, Taiwan, July 16, 2026. REUTERS/Ann Wang Purchase Licensing Rights, opens new tab

SummaryCompaniesWorld's largest contract chipmaker is weighing Texas expansionTSMC has not finalised any Texas investment plan, two sources ​sayCurrent and planned Arizona projects include 12 facilities ‌and an R&D centreTAIPEI, Sept 30 (Reuters) - Taiwan's TSMC (2330.TW), opens new tab, the world's largest contract chipmaker, is evaluating a ​potential investment in Texas to expand chip ​production in the US, two sources familiar with ⁠the matter said.

The potential investment would be in addition ​to the $265 billion TSMC has already committed to Arizona, ​one of the sources said.

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The plans have not been finalised, the sources said, speaking on condition of anonymity because they ​were not authorized to speak to the media.

Taiwanese media ​first reported the development this week, citing unnamed industry sources.

TSMC did ‌not ⁠immediately respond to a Reuters request for comment.

The company unveiled in July a further $100 billion investment in Arizona, expanding its previously pledged investment there to $265 billion to ​build semiconductor manufacturing ​facilities.

Chief Executive ⁠C.C. Wei said at the time that "probably additional four or more fabs will ​be built," referring to both front-end and ​back-end ⁠facilities.

Including current and planned projects, TSMC's Arizona operations will comprise, opens new tab 12 fabrication and advanced packaging facilities as well as an ⁠R&D ​centre.

Chief Financial Officer Wendell Huang told ​Reuters in July that the company would continue to invest in the ​United States.

Reporting by Wen-Yee Lee, Editing by Louise Heavens

Our Standards: The Thomson Reuters Trust Principles., opens new tab

TSMC keeps landing on my buy list quarter after quarter, and the more I study its financials the harder it gets to justify stopping. Here is why I keep adding to a position my friends think I already own enough…

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

I added to my Taiwan Semiconductor (NYSE:TSM | TSM Price Prediction) position again this month, and I already know I will add again next quarter. Every filing this company releases gives me one more reason to keep buying.

My thesis comes down to one sentence. Every serious AI chip needs a factory, and TSMC runs the best factories on earth. The latest news made that case stronger. TSMC is increasing its 2nm wafer capacity as demand climbs, and 2nm wafers carry much higher prices. Higher volume at a premium price is exactly the kind of setup I want to own for decades. Management put it plainly on the July call: “The AI megatrend continues to drive the need for more and more computation, which supports the robust demand for leading-edge silicon.”

Growth That Keeps Speeding Up Second-quarter revenue reached $40.20 billion, up 36.0% YoY. August revenue then grew 53.3% year-over-year, and management now expects full-year growth slightly above 40% in USD terms. 2nm debuted at 3% of wafer revenue in its first quarter of ramp, while advanced nodes already account for 77% of total wafer revenue. Gross margin hit 67.7%, and net income rose 77.41%. Pricing power shows up right there in the margins.

A Valuation That Still Rewards Buyers TSMC trades at a forward P/E of 21 with a PEG ratio of 0.858. Analysts keep chasing the numbers higher. The 2027 EPS consensus stands at $21.9251, up from $19.6630 90 days ago, with nine upward revisions and zero downward over the past month.

Income That Grows Alongside the Business For my retirement account, the dividend matters. TSMC declared TWD 7.00 per share for Q1 2026, up from TWD 6.00 for Q3 2025. The yield sits near 0.9%, and management reiterated an expectation for continued and increasing cash dividends per share in 2027. That is backed by a strong balance sheet: 2025 shareholders’ equity grew 27.33% while total liabilities grew just 4.39%, and cash reached $110 billion.

Why My Money Skips NVIDIA and Intel The name most friends mention first is NVIDIA (NASDAQ:NVDA). The stock carries a forward P/E of 25 and yields about 0.12%. I get more income and a cheaper multiple with TSMC, and I own the supplier no matter which chip designer wins. High-performance computing already makes up 66% of revenue.

The foundry turnaround story is Intel (NASDAQ:INTC). Its trailing EPS stands at -$2.09, its forward P/E runs near 63, and it pays no dividend. I prefer to own the proven leader.

Real Risk I Track Every Quarter The 2nm ramp costs money. Management expects it to dilute gross margin by about 3 to 4 percentage points in the second half, and overseas fabs add more drag. Capex climbed to $60-$64 billion this year, and currency swings between the dollar and the NT dollar hit reported results. Production concentrated in Taiwan remains a real exposure too.

I still keep buying. Even the low end of Q3 guidance, 65%, clears the long-term target of 56% and higher. Management also noted that “a higher level of capital expenditures is always correlated to higher growth opportunities in the following years.”

Next Nodes Already Lined Up Through 2029 A14 enters production in 2027, with volume in 2028 and A13 and A12 following in 2029. Management sees demand staying strong through 2029-2030. As long as the world’s most important chips run through TSMC’s fabs, my buy button stays switched on (we studied what the biggest tech winners looked like early and turned it into a free playbook you can grab here).

Contact [email protected] for any questions or corrections.

Nvidia Corp’s (NASDAQ:NVDA) AI empire has made the chip designer one of the most important companies in the market. But follow the supply chain one step further and the story leads to a Dutch company with a monopoly of its own.

ASML Holding N.V. (NASDAQ:ASML) makes the most advanced EUV (extreme ultraviolet) machines needed to manufacture the chips powering increasingly complex AI systems.

Follow Nvidia to TSMCInvestors first learned to look beyond Nvidia when the AI chip boom made Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM) a critical part of the story. ASML CEO Christophe Fouquet says the next question is even more revealing: How does TSMC make those chips?

The answer leads to ASML.

Fouquet told the Financial Times that investors who initially focused on Nvidia’s chip designs eventually recognized TSMC’s role in manufacturing them. Then they discovered that TSMC relies on ASML’s EUV lithography machines for the most advanced chip production.

ASML has a total monopoly on the most advanced EUV machines, which are essential for producing chips used in complex AI applications.

That puts ASML in a very different position from the more visible AI winners. Nvidia designs the chips. TSMC manufactures them. ASML supplies the machines that make that manufacturing possible.

Read Next

The $400 Million MachineThe scale of ASML’s technology helps explain why the company is so difficult to replicate.

An EUV machine can cost roughly $400 million and is about the size of a double-decker bus. It uses lasers, mirrors, vacuum systems and short-wave light to print increasingly small circuits onto silicon wafers.

But the price tag may actually undersell the complexity.

An ASML EUV machine contains more than 100,000 parts, supplied by 200 principal suppliers and roughly 2,000 companies across the broader ecosystem. Fouquet says that complexity has become an advantage because ASML can work with specialist companies rather than trying to manufacture everything itself.

Companies including Zeiss, Trumpf and VDL supply critical components, while ASML has acquired or invested in selected suppliers when needed to protect the technology chain.

The AI Trade Goes DeeperThat makes ASML an unusual AI infrastructure play.

Its importance does not come from selling AI models, designing GPUs or operating data centers. It sits further upstream, providing equipment that enables the production of the advanced chips those businesses depend on.

Fouquet also expects the AI cycle itself to remain substantial. He estimates the technology’s effect on society and industry could last 10 to 15 years, saying the world is still seeing only the "tip of the iceberg."

For investors, the Nvidia story therefore has another layer. The AI hardware chain does not end with the chip designer or the chip foundry. It reaches back to a Dutch equipment maker whose technology has become one of the industry’s hardest-to-replace links.

Read Next

Photo via Shutterstock

© 2026 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

SummaryTaiwan Semiconductor remains a buy as its valuation is attractive and the uptrend persists ahead of key September and Q3 results.TSM delivered strong Q2 results, with revenue up 36% YoY and gross margin at 67.7%, driven by high-performance computing demand.Management raised FY 2026 revenue growth outlook to above 40% and increased capex guidance to $60–$64 billion, signaling confidence in sustained AI demand.Key risks include margin pressure from the 2nm ramp, potential AI demand shortfalls, execution risks from global expansion, and persistent geopolitical uncertainties. BING-JHEN HONG/iStock Editorial via Getty Images

Taiwan Semiconductor (TSM) is among the key capital receivers from hyperscaler investment. We’ll soon get fresh updates from all the big tech companies from around the world. The first key date, in my view, will be

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Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

TSMC (TSM - Free Report) is one of the stocks most watched by Zacks.com visitors lately. So, it might be a good idea to review some of the factors that might affect the near-term performance of the stock.

Shares of this chip company have returned +8.5% over the past month versus the Zacks S&P 500 composite's +1.3% change. The Zacks Semiconductor - Circuit Foundry industry, to which TSMC belongs, has gained 6.3% over this period. Now the key question is: Where could the stock be headed in the near term?

Although media reports or rumors about a significant change in a company's business prospects usually cause its stock to trend and lead to an immediate price change, there are always certain fundamental factors that ultimately drive the buy-and-hold decision.

Revisions to Earnings EstimatesRather than focusing on anything else, we at Zacks prioritize evaluating the change in a company's earnings projection. This is because we believe the fair value for its stock is determined by the present value of its future stream of earnings.

We essentially look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest business trends. And if earnings estimates go up for a company, the fair value for its stock goes up. A higher fair value than the current market price drives investors' interest in buying the stock, leading to its price moving higher. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

TSMC is expected to post earnings of $4.45 per share for the current quarter, representing a year-over-year change of +52.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.2%.

The consensus earnings estimate of $16.56 for the current fiscal year indicates a year-over-year change of +55.5%. This estimate has changed +0.7% over the last 30 days.

For the next fiscal year, the consensus earnings estimate of $21.22 indicates a change of +28.2% from what TSMC is expected to report a year ago. Over the past month, the estimate has changed +1.7%.

Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock's price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, TSMC is rated Zacks Rank #2 (Buy).

The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:

12 Month EPS

Projected Revenue GrowthWhile earnings growth is arguably the most superior indicator of a company's financial health, nothing happens as such if a business isn't able to grow its revenues. After all, it's nearly impossible for a company to increase its earnings for an extended period without increasing its revenues. So, it's important to know a company's potential revenue growth.

For TSMC, the consensus sales estimate for the current quarter of $45.54 billion indicates a year-over-year change of +37.6%. For the current and next fiscal years, $167.14 billion and $219.13 billion estimates indicate +36.5% and +31.1% changes, respectively.

Last Reported Results and Surprise HistoryTSMC reported revenues of $40.2 billion in the last reported quarter, representing a year-over-year change of +33.7%. EPS of $4.31 for the same period compares with $2.47 a year ago.

Compared to the Zacks Consensus Estimate of $39.63 billion, the reported revenues represent a surprise of +1.44%. The EPS surprise was +11.37%.

The company beat consensus EPS estimates in each of the trailing four quarters. The company topped consensus revenue estimates each time over this period.

ValuationWithout considering a stock's valuation, no investment decision can be efficient. In predicting a stock's future price performance, it's crucial to determine whether its current price correctly reflects the intrinsic value of the underlying business and the company's growth prospects.

While comparing the current values of a company's valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), with its own historical values helps determine whether its stock is fairly valued, overvalued, or undervalued, comparing the company relative to its peers on these parameters gives a good sense of the reasonability of the stock's price.

As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on), making it helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.

TSMC is graded D on this front, indicating that it is trading at a premium to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.

ConclusionThe facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about TSMC. However, its Zacks Rank #2 does suggest that it may outperform the broader market in the near term.

Artificial intelligence (AI) infrastructure spending isn't slowing down, and that's not surprising, as major hyperscalers and AI companies need to fulfill massive contractual backlogs.

Oracle, for instance, recently reported a contractual backlog of a whopping $664 billion. Meanwhile, Alphabet notes that its Google Cloud backlog hit a whopping $514 billion in the second quarter. These massive numbers explain why market research firm Dell'Oro Group projects AI infrastructure spending to exceed $3 trillion by 2030. For comparison, Goldman Sachs expects over $1 trillion in AI investments this year.

Dell'Oro Group's latest estimate is almost double the forecast it issued in January this year. This is great news for Micron Technology and Sandisk, two companies that have benefited significantly from heavy AI data center spending. Micron and Sandisk manufacture compute and storage memory that's solving a critical bottleneck in AI data centers by quickly transporting huge data sets to accelerator chips.

Not surprisingly, both semiconductor stocks have surged impressively over the past year. However, investors have been rotating out of memory stocks lately. Concerns about a potential oversupply in the memory market and the already impressive margins of Micron and Sandisk are the reasons why investors seem to be losing confidence in memory stocks.

That's why it is a good time to take a closer look at Taiwan Semiconductor Manufacturing (TSM +1.23%), another critical cog in the AI infrastructure ecosystem. Let's see why this foundry giant could outperform Micron and Sandisk as AI infrastructure spending accelerates.

Image source: Getty Images.

AI accelerator demand will give TSMC's growth a nice shot in the arm TSMC is a pure-play foundry company that manufactures chips for other companies. Its customers include Nvidia, Advanced Micro Devices, Qualcomm, Sony, Apple, and many others. TSMC serves multiple industries, including data centers, smartphones, personal computers, and automotive.

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AI is currently TSMC's biggest catalyst. The company noted in April that it expects its AI accelerator revenue to increase at a high 50% compound annual growth rate (CAGR) through 2029. However, management noted on the July earnings call that it expects AI accelerator revenue to grow faster than previously estimated. Though TSMC didn't provide a specific number, it seems its AI revenue CAGR could accelerate into the 60%+ range.

A closer look at the company's August revenue growth tells us just why that's likely to be the case. TSMC posted a 53% year-over-year increase in revenue last month. This was well above the 39% revenue growth the company has clocked in the first eight months of 2026. Nvidia CEO Jensen Huang estimates that AI infrastructure spending could hit a range of $3 trillion to $4 trillion by 2030. That's well above the $800 billion capex that TSMC customer Nvidia expects from the top five hyperscalers in 2026.

So, TSMC's AI accelerator revenue is likely to increase at a robust pace in the long run, lifting the company's overall growth rate in the process. Analysts have gradually become bullish on TSMC's revenue growth rate over the next three years.

Data by YCharts

The company's top line could increase by 43% this year, according to consensus estimates on Yahoo! Finance. The chart above makes it clear that the forecast for 2027 and 2028 points to robust double-digit growth, though I won't be surprised to see TSMC exceeding expectations owing to the robust AI infrastructure spending environment.

Moreover, TSMC stands to capitalize on the growth in other niches. For instance, the company can benefit from a rebound in the global smartphone market starting in 2028, when shipments could increase by 5%. Counterpoint Research estimates that smartphone shipments could drop 14% in 2026 and 1% next year due to high component costs. The pick-up in smartphone sales in 2028 would enhance TSMC's growth opportunity, considering that it counts the likes of Apple, Qualcomm, and MediaTek as customers.

Also, TSMC controls 72.5% of the global foundry market, according to market research firm TrendForce. This gives the company impressive pricing power, which is why it is anticipated to increase prices by up to 10% from 2027. This bodes well for TSMC's bottom line.

The stock is poised to skyrocket TSMC stock has appreciated 36% in 2026, underperforming Sandisk and Micron by a huge margin. However, that could change owing to the company's impressive earnings growth potential. Analysts expect a 59% spike in TSMC's earnings in 2026. However, its growth rate is anticipated to drop over the next couple of years.

Data by YCharts

Don't be surprised to see TSMC outpacing analysts' expectations, fueled by the rapid growth of the AI accelerator market and its expansive client base. Given that TSMC trades at just 20 times forward earnings, a discount to the tech-focused Nasdaq-100 index's forward earnings multiple of 24.5, its stock could jump significantly as its growth accelerates.

Assuming TSMC's earnings reach $28.33 per share in 2028, and it trades at 30 times earnings at that time, a premium that a potentially stronger increase in earnings could justify, its stock price will jump to $850. That's just over double where this AI stock is right now.

So, investors looking to capitalize on the next leg of the AI infrastructure boom and hunting for an alternative to Micron and Sandisk would do well to take a closer look at TSMC before it steps on the gas.

Key Takeaways TSMC's August revenue climbed 53.3% year over year to NT$514.81 billion, reflecting strong chip demand.HPC led TSMC's business, accounting for 66% of second-quarter revenue and growing 20% sequentially.TSMC sees a multiyear AI opportunity, with Agentic AI boosting CPU demand in AI data centers. Taiwan Semiconductor Manufacturing Company (TSM - Free Report) , or TSMC, announced its consolidated net revenues for August 2026 of approximately New Taiwan Dollar (NT$) 514.81 billion, marking a 10.1% increase from July 2026 and a 53.3% rise from August 2025. Cumulative revenues from January through August 2026 reached NT$3,386.87 billion, representing 39.3% growth compared to the same period in 2025. The latest monthly performance reflects that the company continues to benefit from strong demand for its leading-edge process technologies.

High-performance computing (HPC) continues to account for the biggest share of TSMC’s business, benefiting from rising data needs and the expansion of AI applications. The platform accounted for 66% of second-quarter 2026 revenues and grew 20% sequentially. The company also saw growth across Internet of Things (IoT), Digital Consumer Electronics (“DCE”) and Automotive, with revenues increasing 4%, 5% and 15%, respectively, from the prior quarter.

TSMC’s technology mix remains heavily weighted toward advanced process technologies, with 7-nanometer and below accounting for 77% of wafer revenues in the second quarter. The 2-nanometer process contributed 3%, while 3-nanometer, 5-nanometer and 7-nanometer accounted for 30%, 33% and 11%, respectively.

Management continues to point to robust AI-related demand, as the AI megatrend continues to drive the need for more computing and leading-edge silicon. Strong demand signals from customers, particularly cloud service providers, continue to support TSMC’s view of a multiyear AI opportunity.

The company also sees another source of silicon demand emerging from Agentic AI, which is increasing the role of CPUs in AI data centers alongside AI accelerators. TSMC is working closely with CPU customers across x86, ARM-based and RISC-V architectures to support these opportunities with advanced technologies and capacity.

TSM Peers UpdateGlobalFoundries (GFS - Free Report) has entered into a long-term manufacturing agreement with Monolithic Power Systems, under which MPS’ proprietary process technology will be deployed at GFS’ advanced 300mm manufacturing facility in Singapore. The collaboration is expected to help GlobalFoundries expand manufacturing capacity for critical power management solutions serving high-growth markets beginning in early 2027. The company finalized a definitive agreement with the U.S. Department of Commerce’s CHIPS Research and Development Office for a $375 million R&D award to accelerate its Quantum Technology Solutions business.

Qualcomm Technologies, Inc. (QCOM - Free Report) has entered into a multi-generation collaboration with Amazon to enable customized silicon at scale for large-scale AI data centers, working together on AI inference. The companies are also developing optical connectivity solutions of up to 1.6T and future-generation solutions. Qualcomm recently expanded its Dragonwing portfolio with highly integrated platforms designed to broaden access to intelligent edge computing across consumer, commercial and industrial segments.

The Zacks Rundown for TSM StockOver the past 12 months, TSMC shares have rallied 60% compared with the industry’s 65.8% growth.

Image Source: Zacks Investment Research

TSM currently trades at a forward 12-month Price/Sales (P/S) of 10.63X compared with its historical median of 11.08X and the industry average of 11.02X.

Image Source: Zacks Investment Research

Estimates for TSMC’s earnings have seen steady upward revisions over the past three months.

Image Source: Zacks Investment Research

TSMC sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here

Taiwan Semiconductor Manufacturing Co. reported record monthly revenue for August on Thursday, as demand for chips used in artificial intelligence applications remained strong.

The world's largest contract chipmaker posted revenue of $514.8 billion New Taiwan dollars ($16.35 billion) for last month, up 53.3% from a year earlier and 10.1% from July.

TSMC shares closed 0.61% lower on Thursday ahead of the revenue release.

The company's monthly revenue has now risen for four straight months.

During its second-quarter earnings call in July, TSMC said AI-related demand continued to be "extremely robust."

The Taiwanese tech giant reported a more than 77% year-on-year jump in second-quarter profit and forecast third-quarter revenue between $44.6 billion and $45.8 billion.

TSMC has maintained its dominance in the global foundry market, with a 72.5% market share in the second quarter, according to a data released by TrendForce Wednesday. Strong demand for AI server processors kept TSMC's advanced 5-, 4- and 3-nanometer capacity fully booked during the quarter, the research firm said.

Samsung Foundry ranked second with a 5.9% share, followed by China's SMIC at 5.4%. 

The world's top 10 foundries posted record combined revenue of nearly $53.49 billion in the second quarter, driven in part by supply constraints for advanced processes used in AI and high-performance computing processors.

Separately, TSMC and Dutch chip equipment giant ASML this week announced an initiative to advance the industry's transition to next-generation chipmaking technology.

TSMC said it plans to use ASML's High NA technology in large-scale manufacturing for advanced nodes starting in 2030, with adoption expected to increase as AI applications require more complex transistor architectures.