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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.

Over the past month, shares of this chip company have returned +4%, compared to the Zacks S&P 500 composite's -0.4% change. During this period, the Zacks Semiconductor - Circuit Foundry industry, which TSMC falls in, has gained 2.1%. The key question now is: What could be the stock's future direction?

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.

Earnings Estimate RevisionsRather 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%.

For the current fiscal year, the consensus earnings estimate of $16.55 points to a change of +55.4% from the prior year. Over the last 30 days, this estimate has changed +0.6%.

For the next fiscal year, the consensus earnings estimate of $21.19 indicates a change of +28% from what TSMC is expected to report a year ago. Over the past month, the estimate has changed +1.5%.

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 #1 (Strong Buy).

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

12 Month EPS

Revenue Growth ForecastEven though a company's earnings growth is arguably the best indicator of its financial health, nothing much happens if it cannot raise its revenues. It's almost impossible for a company to grow its earnings without growing its revenue for long periods. Therefore, knowing a company's potential revenue growth is crucial.

In the case of TSMC, the consensus sales estimate of $45.54 billion for the current quarter points to a year-over-year change of +37.6%. The $167.08 billion and $218.99 billion estimates for the current and next fiscal years indicate changes of +36.5% and +31.1%, 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.

ValuationNo investment decision can be efficient without considering a stock's valuation. Whether a stock's current price rightly reflects the intrinsic value of the underlying business and the company's growth prospects is an essential determinant of its future price performance.

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 F 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 #1 does suggest that it may outperform the broader market in the near term.

SummaryTaiwan Semiconductor Manufacturing Company remains a Buy as Arizona operations shift from margin drag to profit driver, supported by strong pricing power and utilization.TSMC's monthly revenue patterns and FX headwinds explain recent margin pressures, but these are temporary and largely anticipated within current guidance.Capacity constraints, not demand, now limit TSM revenue growth; advanced packaging lines are sold out through 2027, with construction labor the main bottleneck.Tariff risks tied to U.S. investment create a new strategic imperative, making capital spending a toll for market access, but current U.S. expansion supports near-term upside. mesh cube/iStock via Getty Images

Back in July, I rated Taiwan Semiconductor Manufacturing Company Limited, aka TSMC (TSM), a Buy at roughly $424, and the reasoning was simple enough: the stock traded at well under half the multiple its growth

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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.

ASML Stock Rallies as Samsung, TSMC and Intel Advance High-NA Plans Summary

A planned shift to 12-inch photomasks could raise High-NA equipment throughput by as much as 40%

ASML Holding ASML gained about 2% on Tuesday as investors assessed progress by major chipmakers toward adopting the company's newest High-NA extreme ultraviolet lithography systems.

Samsung Electronics, Taiwan Semiconductor Manufacturing and Intel are moving forward with plans to use the advanced equipment. The companies are also working with ASML on a shift from six-inch photomasks to a 12-inch format.

ASML Holding (ASML) said the larger masks could raise High-NA system throughput by as much as 40%. Higher throughput could help chip manufacturers improve production efficiency as demand for processors used in artificial intelligence applications continues to expand.

The companies are also taking a longer-term approach to the technology. Taiwan Semiconductor Manufacturing (TSM) and ASML plan to establish a 12-inch mask test line by 2031, with commercial manufacturing targeted for 2033.

ASML Chief Technology Officer Marco Pieters said the larger mask format could support higher productivity from High-NA equipment. Intel (INTC) and Samsung Electronics are also participating in the development effort, highlighting broader industry interest in the next generation of lithography technology.

Disclosures I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours.

Click for the complete disclosure

One of the best investors riding the artificial intelligence (AI) revolution is Stanley Druckenmiller at the Duquesne Family Office. Druckenmiller is a famous trend follower and was one of the early traders to buy into Nvidia (NVDA -2.01%) as a way to ride the AI boom.

Today, Duquesne and Druckenmiller own two megacap stocks benefiting from AI infrastructure spending, but his top holding by far is an undiscovered winner in genetic testing that few investors are talking about.

Stanley Druckenmiller. Image source: Getty Images.

Investing in AI infrastructure Regarding AI infrastructure, Druckenmiller holds stakes in two megacap technology companies in the United States: Amazon (AMZN -0.60%) and Alphabet (GOOGL -0.03%) (GOOG +0.02%). Today, we can see these bets primarily benefiting from growing AI spending.

Amazon's cloud computing division -- Amazon Web Services (AWS) -- is the leader in its sector and saw revenue grow 37% year-over-year last quarter to $42.2 billion. There is a massive backlog of spending on its AI cloud services, which power fast-growing start-ups like Anthropic and OpenAI. CEO Andy Jassy recently mentioned that AWS could grow to $1 trillion in annual revenue, driven by cloud market share gains and rising total spending on computing infrastructure worldwide.

Alphabet is a bit of a different bet, as it combines the fast cloud growth with the dynamics of the consumer and enterprise AI application economy. The Google Cloud division grew revenue by 82% year-over-year to $24.8 billion, catching up quickly to AWS, though it remains much smaller. Alphabet is growing quickly with its Gemini chatbot, now serving nearly 950 million monthly users, but its Google Search division faces significant competitive pressures.

Overall, these two stocks are a small % of the Duquesne portfolio today, but they have been nice long-term winners for Druckenmiller.

An underfollowed top holding in genomics Notably, close to 20% of Druckenmiller's portfolio, as of his latest quarterly filing -- excluding international holdings -- is a stock called Natera (NTRA -1.23%). Natera is a disruptor in the diagnostics segment and uses its technologies for analyzing tumors and women's health during pregnancies, along with organ transplants.

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Last quarter, Natera's revenue grew 38% year over year to $753 million, due to an increase in tests performed. Full-year revenue guidance was raised as well. Accelerating business momentum is why the stock has been a huge winner for Druckenmiller.

Duquesne first invested in Natera in Q3 of 2022, when the share price was between $35 and $50. Today, it trades at $328, closing in on about 10 times the initial cost basis (the exact figure is unknown). Natera has been a massive winner for Druckenmiller, which is why it is the largest U.S. stock he owned at the end of last quarter.

Why doesn't he own Nvidia anymore? Curiously, even though he was an early bettor on Nvidia, Druckenmiller's Duquesne Family Office currently does not own any of the AI chipmaker. He said in 2024 that he sold Nvidia after it went on a massive run, with sales coming at a split-adjusted price of $80 to $90. Today, Nvidia trades at $230.

The reason for the sale was valuation concerns, but he subsequently said it was a mistake not to let his winners run. Nvidia has not been in the Duquesne portfolio since early 2024.

Druckenmiller's current bet on AI semiconductors is Taiwan Semiconductor Manufacturing. This is the company that actually builds Nvidia chips (Nvidia just designs them). It could be another way to take advantage of the AI trend, but with a stock trading at a more reasonable valuation and a monopoly position in advanced chipmaking at the moment.

Samsung and TSMC, two of the world’s largest semiconductor manufacturers, are moving ahead with ASML’s most advanced chipmaking equipment, strengthening the case for continued growth at the Dutch lithography giant as artificial intelligence drives demand for increasingly sophisticated chips.

ASML's US-listed stock rose about 3% during premarket trading on Tuesday, while its Amsterdam-listed shares rose over 1%.

Samsung plans to adopt ASML’s High Numerical Aperture extreme ultraviolet, or High NA EUV, technology for DRAM production, while Taiwan Semiconductor Manufacturing Co. (TSMC) is preparing to use the machines for advanced logic chips.

The commitments are significant for ASML because High NA EUV is expected to become increasingly important as chipmakers push toward smaller and more complex transistor designs.

ASML is the only company capable of producing EUV lithography equipment, which is used to print extremely fine circuit patterns onto silicon wafers.

Its latest High NA systems can create even smaller and more intricate patterns, although each machine costs roughly $400 million.

Samsung said it plans to use High NA EUV technology for DRAM manufacturing from 2028, with the company saying the technology would help “extend the DRAM scaling roadmap” and improve manufacturing efficiency.

The move comes as memory manufacturers race to produce increasingly advanced chips needed for AI systems.

TSMC, meanwhile, said it expects its use of High NA systems to increase, “driven primarily by the increasingly complex transistor architectures required for AI applications.”

The Taiwanese chipmaker will begin adopting High NA systems based on existing 6-inch photomasks from 2030.

TSMC has previously been cautious about deploying the expensive technology, arguing that the productivity gains did not yet justify the additional cost.

Its latest commitment therefore represents an important shift in the economics of advanced chip production.

TSMC manufactures chips for some of the world's biggest technology companies, including Nvidia, Apple, AMD and Qualcomm, while Samsung remains a major supplier of memory chips.

The commitments from Samsung and TSMC add to ASML’s growing customer base for High NA EUV.

Intel is also using the technology for advanced chip manufacturing, making the three companies some of the most important early adopters of the next generation of EUV equipment.

“This is a big step forward for the adoption of High NA in high-volume manufacturing,” ASML Chief Technology Officer Marco Pieters said.

“This is a significant point where customers recognize the benefit of those systems compared to multi-patterning strategies.”

ASML plans to demonstrate a pilot production line using larger photomasks by 2031, with the technology expected to become ready for high-volume production by 2033.

The company is also working with Samsung and TSMC on next-generation 12-inch photomask technology, up from the current 6-inch format.

Photomasks act as stencils that allow chipmakers to transfer circuit patterns onto silicon wafers.

ASML expects larger masks to improve productivity and reduce manufacturing costs.

“If we're going to pull it off as an industry, then you'll actually see that the productivity of those systems will go up by 40%,” Pieters told Reuters.

The shift toward High NA EUV is closely tied to the semiconductor industry's AI investment boom.

Advanced AI accelerators require increasingly complex transistor architectures, putting pressure on chipmakers to improve manufacturing techniques while reducing the need for complicated multi-patterning processes.

That makes High NA EUV potentially important not only for future performance improvements but also for manufacturing efficiency.

For ASML, stronger adoption could create a major new source of demand after the company spent years working with customers to bring the technology from development into commercial manufacturing.

TSMC is particularly important to that outlook.

The Taiwanese chipmaker accounts for roughly 16% of ASML’s revenue, according to Bloomberg data.

With TSMC, Samsung and Intel now moving toward High NA, ASML has greater visibility into the potential market for its newest machines.

Investors have already placed a substantial premium on ASML's position in the AI semiconductor supply chain.

The stock has gained about 120% over the past year, and analysts increasingly view High NA adoption as an important factor supporting the company’s longer-term growth.

Barclays said the latest announcements “should provide more visibility on adoption which has been a key debate,” adding that the news is “a positive.”

The company has not recently provided a specific forecast for High NA machine sales, although it expects to increase total EUV capacity by about 30% in 2027.

The company had raised its financial guidance for 2026 in July, after reporting stronger-than-expected second-quarter earnings and announcing plans to increase capacity.

Barclays said the stronger customer commitments could force ASML to consider expanding capacity beyond its existing plans.

“We see ASML with a significant decision ahead on whether to further expand EUV capacity than the recently expanded targets it has already given. Demand is clearly strong,” the analysts said.

That creates a potentially important opportunity for ASML.

BofA Global Research maintains a Buy rating on ASML Holding with a price target of €2,452.

Last month, the firm said it expects ASML to deliver one of the strongest growth profiles among large-cap semiconductor equipment makers, with consensus forecasting a 27% compound annual growth rate in revenue, compared with a 22% peer average.

ASML is also projected to post the highest earnings-per-share CAGR among its peers at 39%, versus an average of 33%. BofA’s own revenue and earnings estimates remain above consensus.

As Samsung and TSMC prepare to deploy High NA technology, the company could benefit from a new investment cycle in chipmaking equipment — one increasingly powered by the relentless demand for AI computing.

Crow s Nest Holdings LP reduced its holdings in shares of Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM – Free Report) by 17.8% during the second quarter, according to the company in its most recent disclosure with the Securities and Exchange Commission (SEC). The institutional investor owned 185,000 shares of the semiconductor company’s stock after selling 40,000 shares during the quarter. Taiwan Semiconductor Manufacturing accounts for 26.7% of Crow s Nest Holdings LP’s portfolio, making the stock its biggest holding. Crow s Nest Holdings LP’s holdings in Taiwan Semiconductor Manufacturing were worth $88,350,000 as of its most recent SEC filing.

Other institutional investors also recently modified their holdings of the company. Quattro Advisors LLC purchased a new stake in Taiwan Semiconductor Manufacturing in the fourth quarter worth approximately $25,000. Hilton Head Capital Partners LLC purchased a new stake in Taiwan Semiconductor Manufacturing during the 4th quarter valued at $27,000. Strategic Advocates LLC raised its stake in Taiwan Semiconductor Manufacturing by 62.1% during the 4th quarter. Strategic Advocates LLC now owns 94 shares of the semiconductor company’s stock valued at $28,000 after buying an additional 36 shares during the last quarter. Basepoint Wealth LLC bought a new position in shares of Taiwan Semiconductor Manufacturing during the 4th quarter valued at $31,000. Finally, Evolution Wealth Management Inc. lifted its holdings 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 buying an additional 67 shares during the period. 16.51% of the stock is owned by hedge funds and other institutional investors.

Taiwan Semiconductor Manufacturing Trading Up 0.0% Shares of Taiwan Semiconductor Manufacturing stock opened at $429.07 on Monday. Taiwan Semiconductor Manufacturing Company Ltd. has a 1-year low of $237.90 and a 1-year high of $479.00. The company’s fifty day simple moving average is $420.63 and its 200-day simple moving average is $398.18. The company has a debt-to-equity ratio of 0.14, a current ratio of 2.46 and a quick ratio of 2.25. The stock has a market capitalization of $2.23 trillion, a PE ratio of 30.96, a P/E/G ratio of 0.98 and a beta of 1.39.

Taiwan Semiconductor Manufacturing (NYSE:TSM – Get Free Report) last posted its quarterly earnings data on Tuesday, June 30th. The semiconductor company reported $4.28 EPS for the quarter. The firm had revenue of $39.89 billion during the quarter. Taiwan Semiconductor Manufacturing had a return on equity of 39.25% and a net margin of 50.31%. As a group, equities analysts anticipate that Taiwan Semiconductor Manufacturing Company Ltd. will post 16.52 earnings per share for the current year. Taiwan Semiconductor Manufacturing Cuts Dividend The business also recently disclosed a quarterly dividend, which will be paid on Thursday, January 7th. Stockholders of record on Thursday, December 10th will be paid a $1.0854 dividend. The ex-dividend date of this dividend is Thursday, December 10th. This represents a $4.34 annualized dividend and a dividend yield of 1.0%. Taiwan Semiconductor Manufacturing’s dividend payout ratio (DPR) is 21.43%.

Insider Buying and Selling In related news, VP Bor-Zen Tien acquired 3,000 shares of the business’s stock in a transaction that occurred on Tuesday, July 21st. The stock was bought at an average cost of $74.39 per share, for a total transaction of $223,170.00. Following the purchase, the vice president owned 4,000 shares in the company, valued at $297,560. The trade was a 300.00% increase in their position. The transaction was disclosed in a filing with the SEC, which is accessible through this link. Also, VP Shyue-Shyh Lin bought 2,000 shares of Taiwan Semiconductor Manufacturing stock in a transaction that occurred on Sunday, July 19th. The stock was purchased at an average cost of $71.71 per share, with a total value of $143,420.00. Following the completion of the acquisition, the vice president directly owned 28,269 shares in the company, valued at $2,027,169.99. This represents a 7.61% increase in their position. The SEC filing for this purchase provides additional information. Insiders bought 19,512 shares of company stock valued at $1,450,270 in the last 90 days. Corporate insiders own 1.11% of the company’s stock.

Taiwan Semiconductor Manufacturing News Summary Here are the key news stories impacting Taiwan Semiconductor Manufacturing this week:

Positive Sentiment: TSMC is developing a three-hectare laboratory aimed at speeding supplier validation and addressing its advanced-packaging bottleneck. Because the facility is intended to improve production efficiency rather than add another multibillion-dollar fab, investors may view it as a relatively capital-efficient way to support growing AI-chip demand. TSMC Jumps as a Three-Hectare Lab Attacks Its Packaging Bottleneck Positive Sentiment: Goldman Sachs says the AI spending cycle may still be in its early stages, supporting the outlook for TSMC’s leading-edge manufacturing and packaging businesses. Goldman Sachs Says the AI Trade Is Barely Started Positive Sentiment: Citi identified TSMC as a stock to watch if Apple’s next premium iPhones, including a potential foldable model, command higher prices. More expensive devices could support Apple’s component spending and TSMC’s high-end chip demand. Apple’s New Foldable iPhone Could Cost $2,000 Positive Sentiment: Coverage points to rising demand for specialized cleaning chemicals and other materials required by advanced AI-chip fabs, reinforcing the view that TSMC’s strong margins are supported by a broad semiconductor supply chain. TSMC’s 67.7% Margin Now Needs Twice the Cleaning Chemistry Positive Sentiment: Analyst commentary describes TSMC as a “picks-and-shovels” beneficiary of the AI buildout and argues that its customer diversification and manufacturing position may make it more attractive than many major technology stocks. TSMC Is a Better Buy Than Any of the Magnificent Seven Stocks Neutral Sentiment: Senior Vice President Shu-Hua Fang disclosed a purchase of 2,000 shares, increasing personal ownership by 32.23%. The insider buying is supportive sentiment, though the transaction was disclosed well after the purchase and is small relative to TSMC’s market value. SEC insider trading filing Negative Sentiment: One valuation analysis estimates TSMC may be about 9% above fair value, while its planned investments in Arizona and Europe increase capital requirements. Investors may therefore remain sensitive to execution risks, returns on new capacity, and any slowdown in AI spending. TSMC Could Be 9% Above Fair Value As Capex Plans Grow Analysts Set New Price Targets Several analysts recently commented on TSM shares. Weiss Ratings raised Taiwan Semiconductor Manufacturing from a “hold (c+)” rating to a “buy (b-)” rating in a report on Wednesday, August 26th. Wall Street Zen cut Taiwan Semiconductor Manufacturing from a “strong-buy” rating to a “buy” rating in a research report on Saturday, August 8th. TD Cowen increased their target price on Taiwan Semiconductor Manufacturing from $400.00 to $440.00 and gave the company a “hold” rating in a report on Friday, July 17th. Bank of America raised their target price on Taiwan Semiconductor Manufacturing from $490.00 to $590.00 and gave the stock a “buy” rating in a research report on Wednesday, June 24th. Finally, Susquehanna boosted their price target on Taiwan Semiconductor Manufacturing from $575.00 to $600.00 and gave the company a “positive” rating in a research note on Thursday, July 16th. Three research analysts have rated the stock with a Strong Buy rating, thirteen have assigned a Buy rating and one has issued a Hold rating to the company’s stock. According to MarketBeat, the company currently has a consensus rating of “Buy” and a consensus price target of $523.22.

Get Our Latest Report on TSM

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Taiwan Semiconductor Manufacturing Company (TSMC) is a leading pure-play semiconductor foundry that provides wafer fabrication and related services to the global semiconductor industry. Founded in 1987 by Morris Chang and headquartered in Hsinchu, Taiwan, TSMC manufactures integrated circuits on behalf of fabless and integrated device manufacturers, offering contract chip production across a broad set of technologies and products.

TSMC’s service offering covers logic and mixed-signal process technologies, specialty processes for radio-frequency, power management and embedded memory, and advanced nodes used in mobile, high-performance computing and AI applications.

Read More Five stocks we like better than Taiwan Semiconductor Manufacturing AI Token Costs Are Changing the Hardware vs. Software Debate 3 ETFs That Could Move as Rate Expectations Shift 3 Stocks With September Catalysts Investors Shouldn’t Ignore Ollie’s Bargain Outlet Stock Falls on Weak Comps Despite Margin Gains Want to see what other hedge funds are holding TSM? Visit HoldingsChannel.com to get the latest 13F filings and insider trades for Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM – Free Report).

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South Korea just promised free, unlimited AI to 51 million citizens, and the chipmakers supplying the hardware are already booking it as a win. But the gap between that promise and the compute reality behind it exposes something investors are…

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South Korea’s government has selected a consortium led by SK Telecom, Kakao, and KT to deliver free, unlimited-access general-purpose AI chatbots and agents to roughly 51 to 52 million citizens, with beta testing in September and full launch by year-end. The state is seeding the program with a combined 512 NVIDIA B200 GPUs this year and plans operating subsidies from 2027 onward, alongside a domestic-model quota. That is a rounding error against the compute base frontier labs run on, which is exactly why the demand signal for the three chipmakers below is real but bounded. NVIDIA already flagged the linkage: its most recent 10-Q disclosed an expanded Korea AI factory ecosystem through partnerships with SK Telecom, NAVER, and Brookfield, and a multiyear technology partnership with SK hynix for next-generation memory.

NVIDIA: The Compute Anchor Behind Korea’s AI Push NVIDIA (NASDAQ:NVDA | NVDA Price Prediction) sells the B200 accelerators the Korean state is buying and the Vera Rubin systems the country’s private operators will layer on top. Q2 FY2027 revenue landed at $96.22 billion, up 105.8% year over year, with Data Center at $89.02 billion, up 117%. On the call, management said its sovereign AI business, “grew 35% sequentially and more than tripled year over year in Q2,” and specifically flagged that “South Korea’s LG and Hyundai Motor Group are partnering with NVIDIA to build and scale AI.” Shares are up 23.67% year to date to $230.36, and the P/E sits at 46.

The bull case is that Korea is one instance of a repeatable regional-cloud template. CEO Jensen Huang told analysts that “a country or region can allocate land and power directly to a regional cloud partner in ways it never would to a foreign hyperscaler,” and NVIDIA now expects non-hyperscaler business, including sovereigns and neoclouds, to represent “roughly half of our data center business.” The risk: the Korean disclosure is qualitative, not quantified. The transcript provides no GPU volume, dollar value, or delivery schedule for the LG or Hyundai partnerships, and the 512-GPU state allocation is not remotely hyperscaler-scale. Meanwhile, NVIDIA carries its own concentration risk, with $279.0 billion in supply commitments tied largely to memory procurement for Vera Rubin and no China Data Center compute revenue assumed in Q3 guidance.

SK hynix: The HBM Choke Point With a Korean Passport SK hynix (NASDAQ:SKHY) is the memory half of the “AI for All” equation. Every B200 shipped into Korea, and every Vera Rubin rack behind it, carries the company’s high-bandwidth memory stacks. Preliminary Q2 FY2026 revenue came in at KRW 79.32 trillion, up 50.9% quarter over quarter and 256.8% year over year, with operating profit up 557.2% and net profit attributable to controlling interests up 1,240.8% year over year. The ADS is up 17.2% over the past month to $177.

The bull case is structural HBM scarcity plus geographic diversification. SK hynix held a groundbreaking ceremony for an HBM production base in Indiana on August 27, 2026, framed as “beginning a new future for US-Korea AI”, and it is accelerating a 40 trillion won share repurchase and cancellation program with a target of returning over 50% of free cash flow. NVIDIA itself said memory scarcity is being driven “in large part by the AI build-out itself” and that price increases have exceeded prior expectations. The risk: preliminary results are subject to audit revision, KRW-denominated reporting exposes ADS holders to currency swings, and the AI for All hardware allocation is small enough that it moves Korean policy narrative more than SK hynix’s order book.

TSMC: The Foundry That Prints Everyone’s Silicon Taiwan Semiconductor Manufacturing (NYSE:TSM) fabricates the B200s Korea is deploying, the Rubin dies coming behind them, and the custom accelerators Korean domestic-model developers will inevitably tape out. Q2 2026 revenue reached $40.20 billion, up 36.0% year over year, with HPC at 66% of second-quarter revenue, up 20% quarter over quarter, and advanced nodes at 7nm and below at 77% of wafer revenue. Full-year 2026 revenue is guided to grow “slightly above 40%” in USD terms. The stock is up 41.85% year to date to $428.91.

The bull case is a capacity story with almost no substitutes: TSMC raised its 2026 capital budget to $60 billion to $64 billion and said CAPEX in the next three years will be “even more significantly higher than the past three years”, with an additional $100 billion investment in Arizona bringing total planned Arizona spend to $265 billion. Advanced packaging is the pinch point: management said “our packaging capacity is so tight that now it’s a little bit of my customers’ growth.” The risk is discipline. TSMC’s own chairman warned that aggregating aggressive customer forecasts requires judgment: “I believe every customer tells me the truth. Everyone. You put all the truth together, it’s not the truth.” Q3 gross margin is guided to 65% to 67%, with a 3 to 4 percentage point dilution expected from the 2nm ramp.

Bottom Line Korea’s AI for All is a real, policy-locked demand line for NVIDIA compute, SK hynix HBM, and TSMC wafers. It is too small to meaningfully move any of these earnings models. The initial 512-GPU allocation is a fraction of what a single frontier lab consumes in a week, and the “no limits” language will quickly collide with rate limits, queues, and domestic-model quotas long before it collides with the physics of inference at population scale. Investors should treat the program as one more sovereign proof point for the neocloud playbook Jensen Huang laid out on the last earnings call. The chipmakers get the headlines, but the same buildout has to be powered, cooled, and networked by somebody; we pulled seven of those suppliers into a free report here: 7 Stocks Powering the AI Boom (That Aren’t Chipmakers).

Contact [email protected] for any questions or corrections.

Taiwan Semiconductor Manufacturing (TSM +2.85%) is already worth about $2.2 trillion, with shares of the chip foundry trading at about $427 as of this writing.

My prediction: The company's market value passes the $3 trillion mark before 2029. To be specific, that means sometime before the end of 2028, about two years and four months away.

That may sound like a bold call. The stock would need to reach about $580 per share, about 21% above its 52-week high of $479.

But the yearly return the milestone requires is more ordinary than it sounds. And it's a fraction of the pace TSMC's business is growing at today.

Image source: TSMC.

TSMC needs about 14% a year to get thereGoing from about $2.2 trillion to $3 trillion is a gain of about 35%. Spread over that stretch, it works out to about 14% compounded annually.

For a business growing the way TSMC is right now, that isn't a high bar.

I'm not assuming investors pay more for each dollar of TSMC's earnings than they do today, either. If the stock's price-to-earnings multiple simply holds steady, the share price should track earnings growth over time. In other words, earnings compounding at about 14% a year through 2028 could arguably get the company there on its own.

A 40% yearHighlighting how far ahead of that bar the business is running, TSMC's second-quarter revenue rose 36% year over year to NT$1.27 trillion ($40.2 billion in U.S. dollars), while net income surged 77%. Gross margin was 67.7%, a big step up from 58.6% a year before. And the momentum has carried into the second half of the year. July revenue rose about 45% year over year, putting revenue through the first seven months of 2026 up 37%.

Management expects more of the same. Guidance calls for third-quarter revenue of $44.6 billion to $45.8 billion. Against the year-ago quarter's $33.1 billion, the midpoint represents about 37% growth -- an acceleration from the second quarter's pace in dollar terms.

In July, management also raised its full-year outlook to revenue growth slightly above 40% in U.S. dollar terms.

"Moving into third quarter 2026, we expect our business to be supported by continued strong demand for our leading-edge process technologies, including the steep ramp-up of our 2-nanometer technology," said Wendell Huang, TSMC's chief financial officer, in the company's second-quarter earnings release.

The company is spending like it expects the demand to last, too. Management now plans $60 billion to $64 billion of capital spending in 2026, up from its earlier budget, and it announced an additional $100 billion investment in Arizona to build several more leading-edge chip fabs and advanced packaging plants.

What could go wrong?The main risk is concentration.

High-performance computing accounted for 66% of TSMC's revenue in the second quarter, tying the company's growth closely to the artificial intelligence (AI) build-out. If the biggest spenders on AI infrastructure pull back, growth could slow quickly.

Of course, margins could give back some ground, too. Gross margin guidance of 65% to 67% for the third quarter sits below the 67.7% the company just posted. If profitability drifts lower from here, earnings could grow more slowly than revenue does -- and it's earnings growth, not revenue growth, that has to average about 14%.

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But the prediction can absorb a lot of deceleration. Say revenue growth halves to 20% in 2027, then halves again to 10% in 2028.

Even that path compounds at about 15% a year over those two years, still above the requirement, assuming profit margins hold near current guidance and the price-to-earnings multiple stays put. And it leaves out the rest of 2026, when growth is running at about three times that pace.

The scenario I take more seriously, however, is a market that changes its mind. If investors sour on AI infrastructure spending, they could pay less for each dollar of TSMC's earnings even while those earnings keep growing. A compressing price-to-earnings multiple would likely raise the bar on the business -- possibly well past 14% a year.

Ultimately, though, a business guiding for revenue growth slightly above 40% this year clears a 14% hurdle with plenty of room to spare, even if growth fades hard through 2027 and 2028. I expect Taiwan Semiconductor's market value to top $3 trillion before the end of 2028.

TSMC (TSM - Free Report) closed at $428.91 in the latest trading session, marking a +2.85% move from the prior day. The stock's change was more than the S&P 500's daily loss of 0.38%. At the same time, the Dow lost 0.51%, and the tech-heavy Nasdaq lost 0.29%.

Heading into today, shares of the chip company had lost 0.28% over the past month, lagging the Computer and Technology sector's gain of 2.81% and the S&P 500's gain of 2.08%.

The upcoming earnings release of TSMC will be of great interest to investors. 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, the Zacks Consensus Estimate for revenue is projecting net sales of $45.54 billion, up 37.59% from the year-ago period.

For the full year, the Zacks Consensus Estimates are projecting earnings of $16.52 per share and revenue of $167.08 billion, which would represent changes of +55.12% and +36.48%, respectively, from the prior year.

It's also important for investors to be aware of any recent modifications to analyst estimates for TSMC. These recent revisions tend to reflect the evolving nature of short-term business trends. As such, positive estimate revisions reflect analyst optimism about the business and profitability.

Our research reveals that these estimate alterations are directly linked with the stock price performance in the near future. To exploit this, we've formed the Zacks Rank, a quantitative model that includes these estimate changes and presents a viable rating system.

The Zacks Rank system, which varies between #1 (Strong Buy) and #5 (Strong Sell), carries an impressive track record of exceeding expectations, confirmed by external audits, with stocks at #1 delivering an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has shifted 0.44% upward. TSMC is holding a Zacks Rank of #1 (Strong Buy) right now.

In the context of valuation, TSMC is at present trading with a Forward P/E ratio of 25.25. Its industry sports an average Forward P/E of 25.25, so one might conclude that TSMC is trading at no noticeable deviation comparatively.

We can also see that TSM currently has a PEG ratio of 0.95. 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 average PEG ratio for the Semiconductor - Circuit Foundry industry stood at 0.95 at the close of the market yesterday.

The Semiconductor - Circuit Foundry industry is part of the Computer and Technology sector. Currently, this industry holds a Zacks Industry Rank of 1, positioning it in the top 1% of all 250+ industries.

The Zacks Industry Rank is ordered from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Don't forget to use Zacks.com to keep track of all these stock-moving metrics, and others, in the upcoming trading sessions.

The S&P 500 (^GSPC -0.42%) is right around all-time highs right now, and nothing appears to be looming that could send the market lower. However, surprises do pop up and can send the market crashing (or soaring) at a moment's notice. Investors need to have a short list of stocks ready to buy if it goes down tomorrow. 

Headlining my list are three stocks: Taiwan Semiconductor Manufacturing (TSM +1.97%), Alphabet (GOOG -1.29%) (GOOGL -1.31%), and Amazon (AMZN -1.12%). This list could change if the reason for the market sell-off places a specific company right in the crosshairs, but if it's just a general sell-off, I'm buying these three first.

Image source: Getty Images.

Taiwan Semiconductor Manufacturing The general theme for these three stocks is companies that the world cannot live without. Taiwan Semiconductor is the world's largest chip manufacturer by far, and its chips go into nearly every advanced electronic device. It's also irreplaceable. Taiwan Semiconductor has become the most popular chip foundry for nearly every tech company, and switching away from it is nearly impossible because competitors don't have the capacity that TSMC has.

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An investment in Taiwan Semiconductor is a bet that we're going to need more advanced chips in greater quantities, which seems like an extremely safe bet to make. Right now, Taiwan Semiconductor is supplying a lot of chips to the AI build-out, but there are other parts of its business that are unrelated.

Taiwan Semiconductor is one of the safest bets any investor can make in the market, as it's a bet on advanced technology. If the market sells off, Taiwan Semiconductor will be at the top of my list.

Alphabet Another strongly positioned company is Alphabet. Alphabet operates the Google Search engine, which is an advertising cash cow. While everyone was concerned that AI would replace Google Search, that hasn't happened. Furthermore, Alphabet has integrated AI into Google Search, and it's one of the primary ways the majority of the world interacts with AI on a daily basis.

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Another business unit boosted by AI is Alphabet's cloud computing division, Google Cloud. Alphabet has spent hundreds of billions of dollars building out data centers to run AI workloads, and charges by usage. If something causes the market to crash, these workloads won't all of a sudden just stop running. So, Alphabet will receive continuous revenue in good times and bad.

This steady income stream, combined with a dominant platform, makes Alphabet a smart stock to buy and own in any market condition, and it always has a knack for emerging from a downturn stronger than before.

Amazon Amazon and Alphabet are two similar companies in terms of why I think they're smart buys in a downturn. Amazon has a strong commerce business, and while growth may slow during a downturn, everyone still needs a place to go to buy basic goods. Amazon also has a strong cloud computing platform, Amazon Web Services (AWS), that will stay strong for the exact same reason as Alphabet's.

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Similar to Alphabet, Amazon has survived market turbulence before, including the dot-com bubble, the great financial crisis, and the COVID-19 pandemic. Amazon has built a commerce empire and a thriving cloud computing segment that's growing at a rapid rate. I don't think there's anything that will slow Amazon down, and any downturn will be a bump in the road.

Amazon is not only a top stock to buy in a downturn, but I also think it's a strong stock to buy now, as it's benefiting from the strength of AI spending.

It's not easy forecasting stock winners. I wrote a series of articles at the beginning of the year forecasting which "Magnificent Seven" stock would be the best to buy this year. My top pick, Alphabet (GOOG +1.59%) (GOOGL +1.59%), is up only 7% so far this year, while my bottom pick, Apple (AAPL +1.00%), is up nearly 20%.

Nvidia (NVDA +1.80%) is once again leading the way, and there's a lot to love about Jensen Huang's company. The most recent earnings report showed revenue of $96.2 billion, up a whopping 106% from a year ago. And the company's next-generation Vera Rubin processors are expected to start generating massive profits soon, as Nvidia calls them the fastest-ramping product in company history.

But Nvidia doesn't have the entire field to itself. It's getting more competition. Alphabet has chips called Tensor Processing Units, its in-house alternative to Nvidia's customized to run on Google Cloud, and is now selling TPU capacity. Amazon's (AMZN +1.54%) custom silicon business is also growing, and recently exceeded a $25 billion annual run rate -- its Trainium and Inferentia chips are purpose-built to run on Amazon Web Services' cloud.

Image source: The Motley Fool.

Meta Platforms (META +3.01%), Microsoft (MSFT +2.68%), and Tesla (TSLA +5.42%) are all Nvidia customers. Apple also designs its own chips and has a completely different artificial intelligence strategy than other Magnificent Seven members -- it's focused on embedding AI applications and intelligence into its operating systems.

But these companies have one major thing in common -- they are all customers of another trillion-dollar publicly traded company. And that's why I think that Taiwan Semiconductor Manufacturing (TSM +0.36%), which is the biggest chip foundry in the world, is a better buy today than any single member of the Magnificent Seven cohort.

TSMC is "magic" Nvidia and Apple are the two largest companies in the world. And both of them are major TSMC customers. Apple is geared to buy more than 100 million advanced chips from TSMC's Arizona foundry this year. And Huang, the CEO of Nvidia, has gushed about TSMC, at one point calling it "one of the greatest companies in the history of humanity." In another interview, Huang told reporters, "You can't overstate the magic that is TSMC."

Other Magnificent Seven companies are also using TSMC. Meta Platforms, which is working to create "superintelligence" and free personal AI assistants, is designing custom AI chips with Broadcom but using TSMC as the foundry.

TSMC also manufactures Amazon's custom silicon and provides the silicon Alphabet uses to build its TPUs, in conjunction with Broadcom.

TSMC CEO C.C. Wei talked about the increase in agentic AI and how that emerging technology is leading to a new demand for central processing units -- CPUs -- in data centers. He said: "The emergence of agentic AI is leading to a resurgence in the role of CPUs in AI data centers, which drive more silicon demand in addition to AI accelerators. We believe this is positive for TSMC, as no matter what CPU approach is taken, whether it's a x86, Arm-based, or RISC-V architecture, they are almost all TSMC's customers."

Data by YCharts

TSMC's results speak for themselves If you needed another reason to like TSMC, just look at the year-to-date performance.

TSMC is outperforming every member of the Magnificent Seven this year, with a gain of nearly 36%. And over the last 12 months, it's up a whopping 78% -- again, outperforming every member of the Magnificent Seven.

Data by YCharts

Revenue in the second quarter was $40.2 billion, up 33.7% from a year ago. Gross margin was a whopping 67.7%, and the company's net profit margin was an impressive 55.6%.

And I expect those numbers to get even better. TSMC began producing chips using its new 2-nanometer process technology for the first time in the second quarter. TSMC said those chips, which offer higher density and energy efficiency, accounted for only 3% of TSMC's wafer revenue in Q2, but that number will increase as sales increase.

TSMC is also increasing its investments in the U.S., having recently announced another $100 billion in construction for its Arizona foundries. That increases TSMC's total investment in its Arizona site to $265 billion.

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The case for TSMC TSMC is already outperforming the Magnificent Seven this year as investors recognize its unique role in the expansion of AI. And there's every reason to believe that will continue, particularly as members of the Magnificent Seven turn to TSMC to provide the silicon or manufacture their chips.

With the rollout of 2nm technology and a dominant position in the foundry market, TSMC is in a great position to continue to provide outsize revenue and profits for shareholders.

Taipei is selling political reliability while overseas expansion tests whether TSMC can preserve extraordinary fabrication economics. Summary

Trust wins orders; global factories must preserve margins.

Taiwan Semiconductor Manufacturing TSM, the world's largest contract chipmaker, inched roughly 0.2% higher to $414.62 Wednesday as Taiwan turned political stability into a semiconductor selling point. President Lai Ching-te said democracy and the rule of law underpin the island's position as a trusted chip supplier. In a fragile global supply chain, trust has become a competitive weapon.

The numbers make that weapon even stronger. TSMC's second-quarter results showed revenue rocketing 33.7% to $40.2 billion. Gross margin hit 67.7%, operating margin reached 60.3% and net margin climbed to 55.6%. Better still, its cutting-edge two-nanometer process already contributed 3% of wafer revenue. The next chip cycle is not approaching—TSMC is already monetizing it.

Now comes the expensive part. TSMC plans approximately $265 billion of U.S. manufacturing investment while joining a €3.5 billion German facility. These factories spread geopolitical risk, but higher overseas labor, construction and utilization costs could squeeze the margins investors love. The picture captures that tension: at $414.62, the stock trades 32.12% above its $313.81 GF Value estimate. The market already believes in TSMC's dominance. Now the company must prove that global expansion will not weaken the profit machine.

Disclosures I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours.

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One ETF sponsor filed a bearish bet against the chip industry's biggest name, then five days later launched a fund built to profit from the same sector's growth. The timing raises questions about strategy, fee collection, and which investors end…

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Five days. That’s the gap between Defiance ETFs filing paperwork for a 2X daily bearish bet against Taiwan Semiconductor Manufacturing (NYSE:TSM | TSM Price Prediction) and launching a long fund built on the very foundry industry that Taiwan Semiconductor dominates. On August 26, 2026, the firm filed for a 2X short TSM product. On September 1, 2026, the same sponsor rolled out the Defiance Global Foundries ETF (NASDAQ:AIFR), charging investors 0.71% a year to own the sector TSM leads.

The irony is structural. TSM has climbed 81.26% over the past year and 36.92% year to date, closing at $414 on September 1. Defiance is now positioned to collect fees whether investors want to bet against that run or ride the industry it powers.

Same Sponsor, Opposite Trades, Same Week According to the launch documentation, AIFR is an index fund tracking the global semiconductor foundry industry, with an expense ratio of 0.71% gross and 0.71% net, per the fund’s 497K prospectus filed September 1, 2026. Total net assets, holdings, and NAV history were not disclosed in the prospectus snapshot, meaning day-one size is unknown.

The TSM short filing is part of a broader Defiance wave. According to the source brief, the firm filed paired 2X long and 2X short funds on IonQ, Palantir, MicroStrategy, and Rocket Lab in the same late-August stretch. The playbook is straightforward: monetize both directional views on volatile names, then layer a thematic long on top. Daily 2X funds, long or short, are engineered to reset every session, and their tracking decays when held for more than a single day, a mechanical drag most retail investors underestimate.

Foundry Stocks Are Diverging Sharply Calling AIFR a “foundry” fund papers over a wide performance split inside the theme. TSM’s one-year gain of 81.26% looks tame next to Intel (NASDAQ:INTC), up 265.38%, United Microelectronics (NYSE:UMC), up 216.28%, and Tower Semiconductor (NASDAQ:TSEM), up 238.42%.

Then there’s the laggard. GlobalFoundries (NASDAQ:GFS) closed at $43.93 on September 1, down 12.12% in a month and off 5.19% over five years. GFS’s Q2 EPS of $0.30 missed the $0.32 estimate, even as its Communications Infrastructure & Datacenter segment surged 62.0% year over year to $277 million on silicon photonics demand. Own the theme through AIFR and you own that spread.

Why the TSM Short Filing Has Standalone Logic Even bullish observers might note the setup around TSM. TSMC raised its 2026 capex to $60 billion to $64 billion and announced an additional $100 billion U.S. investment in Arizona, bringing planned Arizona spend to $265 billion. CEO commentary was blunt: “Our conviction in the multi-year AI megatrend remains very high.” But options desks are hedged, with a full-chain put/call ratio of 1.48 and near-term expirations running above 1.5. A 2X inverse product is a way to sell that anxiety.

What Retail Investors Should Actually Weigh The bet on AIFR is that pure-play foundry exposure, weighted across TSM, GFS, UMC, INTC, and TSEM, captures the AI capex cycle better than owning any one of them (we reverse-engineered what the biggest chip winners looked like early in a free playbook you can grab here). The open question is whether 0.71% is a fair toll when broader semiconductor ETFs offer similar exposure at lower fees, and when the top holding, if TSM ends up as one, likely drives most of the fund’s returns anyway. Holdings for AIFR were not published in the prospectus snapshot.

The bear read is simpler: paying an active-style fee for an index that mixes 216% one-year winners with a five-year underperformer is the definition of dilution.

What to Watch Next Defiance hasn’t disclosed AIFR’s initial AUM, full holdings list, or index weights in the materials reviewed. The 497K prospectus is public on SEC EDGAR. The bearish TSM product’s effective launch date, ticker, and structure are the next data points. TSM reports Q3 2026 results against a consensus of $4.4496 EPS on revenue guided to $44.6 billion to $45.8 billion, an earnings report that will test both sides of Defiance’s paired trade at once.

Contact [email protected] for any questions or corrections.

Taiwan's semiconductor prowess is built ​on the foundations of democracy and rule of law, becoming a trusted international partner ‌that keeps its promises to supply the world, President Lai Ching-te said on Tuesday.

Taiwan is home to TSMC (2330.TW), the world's largest contract chipmaker and main producer of the advanced chips powering the AI trend.

Amid tensions between China and ​the U.S. and Europe over trade and technology, Taiwan has sought to promote itself ​as a reliable, democratically governed semiconductor manufacturer.

Speaking at the SEMICON trade show in ⁠Taipei, which this year is being attended by senior executives from companies including Microsoft (MSFT.O) and Alphabet ​Inc's (GOOGL.O) Google, Lai said AI computing power requires chips and global collaboration.

"Over the decades, Taiwan has built ​a complete semiconductor cluster, possessing fast, flexible, and highly efficient manufacturing capabilities, and on the foundation of democracy and the rule of law, has stably supplied the global market and kept its promises," he added.

Taiwan has faced pressure ​from the U.S., its most important international backer and arms supplier, to reduce the heavy global ​concentration of chipmaking on the island, and TSMC is investing $265 billion to build factories in Arizona.

U.S. President Donald ‌Trump has ⁠on occasion criticised Taiwan for "stealing" American semiconductor business, a perception Taiwan's government says is unfair even as it has backed its companies to increase their U.S. investments.

Speaking in a pre-recorded video message to SEMICON played shortly before Lai spoke, Jacob Helberg, U.S. under secretary of state for economic affairs, ​said semiconductors will shape who ​leads in AI, ⁠how defence capabilities will evolve, and "who sets the terms of the global economy for the next generation".

"Now, Taiwan is investing in the United States, joining ​us in building up our manufacturing base because the world has learned, ​sometimes the hard ⁠way, that concentration without resilience is a vulnerability," he added.

Lai said that Taiwan will work with countries around the world on chips in the face of natural disasters, pandemics or "geopolitical shifts" to diversify risk ⁠and jointly ​build a more resilient supply chain.

"Taiwan has the capability ​to manufacture the world's most advanced chips, and will cherish the trust built with international partners over decades, continuing to be ​a stable and reliable partner for the global technology industry."

TSMC offers premier exposure to advanced computing and AI-driven semiconductor demand, with a dominant 73%+ foundry market share. TSMC's robust economic moat, technological leadership, and deep customer ties underpin high ROTC (~23.6%) and ROIC (~32.5%), far exceeding WACC. My fair value estimate is ~$527, indicating ~29% upside from current levels, justifying a 'Buy' rating based on GARP metrics and risk-adjusted returns.

Key Takeaways Taiwan Semiconductor's Q2 2026 revenues surged 33.7% year over year to $40.2 billion amid strong demand.TSM expects 2026 revenues to rise more than 30% in U.S. dollar terms on robust AI demand.TSM is ramping N2 capacity and expanding overseas fabs to support rising AI, HPC and smartphone demand. Taiwan Semiconductor Manufacturing Company Limited (TSM - Free Report) is benefiting from the surging demand for AI infrastructure, rapid adoption of leading-edge process technologies and growing requirements for advanced semiconductor packaging. These trends, along with capacity expansion across Taiwan and overseas, should help sustain the company’s growth momentum over the coming years.

TSM’s recent results underscore the strength of these drivers. Second-quarter 2026 revenues soared 33.7% year over year to $40.2 billion. Net income and earnings per share jumped 77.4% from the year-ago quarter. Management expects third-quarter revenues between $44.6 billion and $45.8 billion, indicating continued strong demand for the company’s advanced manufacturing technologies.

AI Boom: TSM’s Primary Growth CatalystThe rapid buildout of AI infrastructure is arguably the most important long-term growth driver for TSM. Cloud service providers and semiconductor designers continue to invest heavily in AI accelerators, custom ASICs, networking chips and other high-performance computing products, increasing demand for the company’s most sophisticated process technologies.

Management has highlighted extremely robust AI-related demand as the industry moves beyond generative AI toward agentic AI applications, which require substantially greater computing capacity. Taiwan Semiconductor noted that both customers and major cloud service providers continue to provide strong demand signals, reinforcing its confidence in the multi-year AI megatrend. Supported by these trends and its technology leadership, the company expects 2026 revenues to increase more than 30% in U.S. dollar terms.

The opportunity extends beyond GPUs. CPUs, networking processors, custom accelerators and AI-specific ASICs increasingly require leading-edge manufacturing and sophisticated packaging. Taiwan Semiconductor believes the intensifying AI investment cycle will drive richer semiconductor content and greater use of advanced process technologies and 3D packaging, strengthening its position across the broader AI computing ecosystem.

Leading-Edge Nodes Strengthen TSM’s Competitive PositionTaiwan Semiconductor’s ability to continually move customers toward more advanced manufacturing nodes represents another important growth engine. In the second quarter, 3-nanometer products accounted for 30% of wafer revenues, while 5-nanometer and 7-nanometer technologies contributed 33% and 11%, respectively. The newly introduced 2-nanometer technology already generated 3% of wafer revenues, highlighting the rapid migration toward TSM’s newest processes.

The N2 platform should become increasingly important. Taiwan Semiconductor commenced high-volume production of its 2-nanometer technology in the fourth quarter of 2025 and is ramping capacity at Hsinchu and Kaohsiung to meet strong smartphone and HPC/AI demand. The company is also extending the platform through N2P and A16, with volume production scheduled for the second half of 2026.

A16 is particularly relevant for high-performance computing applications because its Super Power Rail architecture is designed for products with complex signal routing and demanding power-delivery requirements. Taiwan Semiconductor’s A14 technology is scheduled for volume production in 2028, providing another avenue for customers seeking greater computing performance and energy efficiency.

Global Manufacturing Footprint Expands Growth OpportunitiesTSM’s widening manufacturing footprint offers another avenue for long-term expansion. Capacity investments in the United States, Japan and other locations allow the company to serve customers closer to major end markets while helping governments and technology companies diversify semiconductor supply chains.

The Arizona expansion is particularly significant because the second fab will introduce 3-nanometer production to the United States. At the same time, the company’s Japanese expansion broadens Taiwan Semiconductor’s ability to support customers across advanced computing, automotive and other semiconductor markets.

Although overseas fabs can initially carry higher costs than Taiwan operations, their strategic value could strengthen customer relationships and broaden TSM’s addressable opportunities over the long run.

Price PerformanceTaiwan Semiconductor has gained 71.8% in the past year compared with the sector’s growth of 28.6%. It has outperformed peers like Monolithic Power Systems, Inc. (MPWR - Free Report) and Analog Devices, Inc. (ADI - Free Report) . While Monolithic has gained 51.1%, Analog Devices surged 45.2% during this period.  

One-Year TSM Stock Price Performance

Image Source: Zacks Investment Research

Moving ForwardTSM sits at the intersection of several powerful semiconductor trends. Explosive AI computing requirements are supporting demand for leading-edge chips and advanced packaging, while migration toward N2, N2P and A16 technologies should provide additional growth opportunities. Expanding 3-nanometer capacity and a broader global manufacturing footprint further strengthen the company’s ability to address rising customer requirements.

The stock has a long-term earnings growth expectation of 26.5% and delivered a trailing four-quarter average earnings surprise of 10.1%. TSM currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Riding on a robust earnings surprise history and favorable Zacks Rank, Taiwan Semiconductor appears primed for further price appreciation. Consequently, investors are likely to profit if they bet on this high-flying stock now.

Taiwan Semiconductor Manufacturing TSM , the chipmaking engine behind the AI boom, jumped approximately 1.6% to $416.59 Tuesday morning as traders piled in before Nvidia's NVDA Wednesday results. Nvidia's guidance is the trigger. More AI-chip demand means more pressure on TSMC's already critical advanced-manufacturing and packaging network.

The growth is ripping. TSMC's July revenue rocketed 44.7% to NT$467.58 billion, while management lifted its 2026 capital-spending plan to between $60 billion and $64 billion. That is a massive bet on sustained demand for leading-edge chips. TSMC is spending now because the next wave of AI capacity cannot appear overnight—and customers are already knocking.

But the stock is no bargain. At $416.59, it sits 31.62% above its GF Value estimate of $316.50. That gap screams confidence, but it also screams expectations. Nvidia could pour more fuel on the rally with blockbuster guidance. If the outlook merely meets the hype, however, TSMC's rich premium could leave little room for error.

Taiwan Semiconductor powers every major AI chip on the planet, yet its stock trades at a fraction of the valuations enjoyed by its own customers. Whether that discount closes or widens in 2027 depends on three things going right simultaneously.

Taiwan Semiconductor Manufacturing (NYSE:TSM | TSM Price Prediction | TSM Price Prediction) is the operating system behind the AI buildout. Every leading-edge accelerator from NVIDIA (NASDAQ:NVDA), AMD (NASDAQ:AMD), Broadcom (NASDAQ:AVGO), and Apple (NASDAQ:AAPL) runs through its fabs.

Q2 2026 delivered $40.20 billion in revenue, up 36.05% year over year, with gross margin hitting 67.7%. Yet at $410.12, shares trade at a discount to the AI names they enable. Can TSM reach $650 by 2027?

Why TSM Shares Cooled Off in August Strong fundamentals can’t stop short-term pullbacks. TSM is down 4.84% over the past week and up only 1.66% over the past month, despite a 35.64% YTD gain and 77.93% one-year return.

The immediate drag is the 2nm ramp, which management expects to dilute gross margin by about 3 to 4 percentage points in coming quarters.

Add overseas fab dilution, capex creep to $60 billion to $64 billion in 2026, and persistent Taiwan geopolitical risk, and you get a stock that beats on every metric but keeps hitting resistance. With a beta of 1.258, TSM swings harder than the broad market on AI-spend jitters.

Wall Street Sees Upside. Our Model Says More The Street is unusually one-sided. Of 19 analysts, 6 rate TSM Strong Buy, 12 Buy, 1 Hold, and none Sell. Consensus target sits at $554.45, implying 35.2% upside. Our base case lands at $533.99, or 30.2% upside, with a bull case of $613.86 and bear case of $434.16. Confidence is high at 0.9.

With analyst bullishness at 95% and Q2 EPS growth of 77.4%, targets look reactive rather than forward-looking. If AI capex compounds through 2027, $554 will feel conservative fast.

Path to $650 Per Share Reaching $650 from today’s price of $410.12 requires a gain of 58.5%. With forward EPS of $17.32, a price of $650 implies a forward P/E of 38x. Our base case of $533.99 implies 30x, meaning the bold target requires additional multiple expansion.

Is that achievable? Our 1.15 adjustment factor is powered by sector momentum, 95% analyst bullishness, and accelerating earnings. The forward P/E compression story is real: if EPS compounds toward management’s long-term target of a 25% USD revenue CAGR from 2024 to 2029, today’s multiple looks stretched only on trailing math.

Catalysts include the additional US$100 billion Arizona investment, A14 volume production in 2028, and Q3 guidance of $44.6 billion to $45.8 billion.

Management is direct: “Our conviction in the multi-year AI megatrend remains very high.” The primary risk is a demand air pocket in 2027 if hyperscaler capex normalizes faster than expected.

Where TSM Trades Today vs Its Earnings Power At $410.12, TSM trades at roughly 24x forward earnings. That’s cheap for a company posting 67.7% gross margins and 77.4% earnings growth, well below NVIDIA, AMD, or Broadcom.

Shares sit between a 52-week low of $223.58 and high of $479, with a 10-year return of 1,688.19% reinforcing that patient owners have been paid. The valuation gap between TSM and its customers is the bull case in one sentence.

Is $650 Realistic? Here’s My Take Getting to $650 in 2027 demands a 58.5% gain and a forward P/E rerating toward the high 30s. It’s a stretch, but not a fantasy.

Three things need to go right: 2nm ramps on schedule and margins recover into 2027, AI capex from hyperscalers holds through the next cycle, and TSM executes its Arizona and Japan expansion without cost overruns. A Taiwan Strait shock is the one factor that could derail everything.

Returns at this level shouldn’t be expected every year, but we’ve outlined the blueprint for how Taiwan Semiconductor Manufacturing could reach $650 in 2027 (we reverse-engineered what the biggest chip winners looked like early into a free playbook you can grab here).

Contact [email protected] for any questions or corrections.

With the latest round of Form 13-Fs being available, investors can track what the smart money was doing during Q2. Among the most popular buys during the quarter were Amazon (AMZN +3.97%), Alphabet (GOOG +1.53%) (GOOGL +1.74%), and Taiwan Semiconductor (TSM -2.29%). All three of these stocks were ones that I was already bullish on, but after seeing the smart money load up on shares, I'm even more confident in my AI picks.

This trio is a smart and fairly safe way to invest in the AI buildout, and even though they've performed strongly over the past few years, now is still a great time to buy.

Image source: Getty Images.

Amazon Amazon was among the most popular stocks to purchase during Q2. Several billionaire-run hedge funds loaded up on shares, including Peter Thiel's fund, David Tepper's Appaloosa Management, Philippe Laffont at Coatue Management, and Stanley Druckenmiller at Duquesne Capital, to name a few. Those are a lot of firms loading up on Amazon's shares, and it's easy to see why.

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Although they didn't know what Amazon was going to report in Q2, they knew that Amazon's major data center capital expenditure investments would soon start paying off. That fully emerged in Q2, when Amazon reported 37% year-over-year growth in Amazon Web Services (AWS).

Its legacy commerce divisions also posted solid results, with North American sales rising 16% and International revenue increasing by 15%. Overall, this was one of Amazon's best growth quarters in a long time, and these funds saw the writing on the wall and purchased shares before Amazon reported.

These trends are still prevalent, and Amazon's future results are likely to be strong as well. That makes it a great stock to consider buying now, and I'm confident Amazon will be a top performer to end the year.

Alphabet Alphabet was another popular stock pick, with some of the same firms that bought Amazon stock also loading up on Alphabet. A lot of the same themes prevalent in the Amazon investment echo in Alphabet, as its base business is doing quite well but its cloud computing segment is also doing fantastic, mostly thanks to the increased computing capacity that has popped up from major capital investments.

The company's Google Cloud revenue soared 82% in the second quarter -- a trend that will likely persist over the next few years.  This helped drive Alphabet to one of its highest quarterly growth rates in the past decade.

GOOG Revenue (Quarterly YoY Growth) data by YCharts

Alphabet is truly firing on all cylinders, and seeing major hedge funds invest in it should come as no surprise.

Taiwan Semiconductor Last is Taiwan Semiconductor, one of the biggest beneficiaries of the AI race. TSMC is the world's largest logic chip manufacturer and supplies the vast majority of chips used by AI computing units. While it has competition, none can match the sheer scale of TSMC, and companies are forced to use it because it is the only one with large enough capacity to handle demand. However, firms are more than happy to partner with Taiwan Semiconductor to produce chips because its technology and manufacturing processes are second to none.

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Taiwan Semiconductor can only root for increased AI computing demand, as it is slated to benefit regardless of which computing unit type is at the top of the leaderboard. With a lot more data center construction coming, Taiwan Semiconductor is slated to benefit from the buildout.

As a result, many hedge funds loaded up on its stock during Q2, including some already mentioned firms like Coatue Management and Duquesne Capital, but also some others like Chase Coleman's Tiger Global Management. Taiwan Semiconductor is a top AI stock pick, and investors who haven't picked up shares should consider doing so, as these funds have proven that it isn't too late to buy more.

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An updated edition of the July 13, 2026, article.

China's technology footprint in the United States heads into the final stretch of 2026 on a resilient, if choppy, footing. July brought a fresh USTR Section 301 tariff of 12.5% over forced-labor enforcement gaps, and on Aug. 5, Beijing countered with tighter drone-export scrutiny and blacklisting of several U.S. entities, ahead of an anticipated Xi-Trump meeting in Washington around September. Even so, the broader Nov. 10 tariff-pause framework from the May Beijing summit remains intact, and Washington has signaled no rush to unwind it, suggesting "constructive stability" should largely hold into early 2027, with periodic friction rather than rupture. In this scenario, Chinese companies, including ACM Research (ACMR - Free Report) , GDS Holdings (GDS - Free Report) , Kingsoft Cloud (KC - Free Report) and Taiwan Semiconductor (TSM - Free Report) , represent compelling portfolio opportunities.

Sector-by-Sector ProgressIn semiconductors, Washington's licensing regime loosened further, with Nvidia reportedly cleared to ship H200 chips to firms, including ByteDance and Tencent, by mid-August, even as regulators reviewed offshore access to advanced GPUs via Southeast Asian data centers. Domestic substitution continued regardless, with Huawei and SMIC pressing ahead on capacity expansion. Expect selective licensed access and accelerating self-sufficiency to define the rest of 2026 and early 2027.

In electric vehicles, BYD posted its strongest month of 2026 in July, delivering 419,211 NEVs, with record overseas shipments of nearly 180,000 units offsetting a narrowing domestic decline, while industry-wide NEV exports surged more than 140% year over year; exports should remain the primary growth engine into 2027, even as domestic targets stay a stretch.

In artificial intelligence (AI), DeepSeek deepened its embodied-AI push, investing in Unitree's blockbuster Shanghai IPO and agreeing to co-develop robotics AI models, while Chinese AI firms continued drawing scrutiny over overseas chip access. A formalized bilateral AI-safety dialogue and continued open-source releases appear likely through early 2027.

In humanoid robots, Unitree's STAR Market debut surged more than 600%, valuing the firm near $9 billion and backed by DeepSeek, Tencent and Alibaba; Beijing's push toward mass humanoid deployment should keep shipment volumes climbing into 2027.

In aerospace, COMAC's C919 completed its first international flight, to Ulaanbaatar, Mongolia, on Aug. 12, alongside high-altitude prototype testing of a stretched C919-600 variant; deliveries should keep climbing gradually, with route expansion and incremental EASA-certification progress likely into 2027.

In computerized machines and defense, spending held near $277 billion, sustaining hypersonic and drone programs even as curbs tightened on the dual-use drone supply chain, which is likely to persist into 2027.

In medical devices, import-substitution kept gaining ground domestically, a trend likely to extend into 2027 alongside expanded approvals.

In high-tech maritime and rail equipment, the CR450 high-speed train, having posted a 453 km/h test record, nears design finalization for 400 km/h commercial service, positioning 2027 as a plausible rollout window alongside continued shipbuilding expansion.

In new synthetic materials and advanced electrical equipment, battery-grade materials and aerospace composites retained state-backed investment, while energy storage scaled past 100 gigawatts; both should see continued localization and market-share gains into early 2027.

Taken together, August's developments reinforce a China technology landscape in the United States marked by improving stability, selective friction and steady momentum across strategic sectors heading into 2027.

Chinese technology companies present compelling opportunities for investors navigating geopolitical volatility through late 2026's trade framework. Our China Tech Screen is an invaluable source for identifying stocks with massive growth prospects in the space.

Explore 30 cutting-edge investment themes with Zacks Thematic Screens and uncover your next big opportunity.

4 Chinese Tech Stocks in Focus Right NowTaiwan Semiconductor's near-term fundamental outlook appears increasingly compelling, underpinned by strong guidance and pivotal strategic moves. Management's third-quarter 2026 guidance projects revenues of $44.6-$45.8 billion, reflecting continued strong demand for advanced nodes. The 2-nanometer technology, which contributed 3% of second-quarter 2026 wafer revenues, is expected to ramp steeply through the third quarter, widening TSMC's technology leadership. Advanced technologies — defined as 7-nanometer and below — already account for 77% of total wafer revenues, underscoring a decisive mix-shift toward higher-value nodes. July 2026 sales reached NT$467.58 billion, up 44.7% year over year. This Zacks Rank #1 (Strong Buy) company’s agreement with Sony Semiconductor Solutions to establish a joint venture for next-generation image sensors in Japan expands its specialty technology reach, significantly diversifying the revenue base while strengthening its global manufacturing footprint. You can see the complete list of today’s Zacks #1 Rank stocks here.

ACM Research is at an inflection point driven by multi-platform momentum and rising order activity. Management raised full-year 2026 revenue guidance to $1.125-$1.175 billion, suggesting 25-30% growth backed by growing customer demand. The Ultra ECP app horizontal panel electroplating tool — the world's first commercial system of its kind — secured first production and evaluation orders in August 2026, broadening ACM's global customer base. The Ultra C Tahoe has been extended into a multi-process wet processing platform now in volume production at leading manufacturers, validating scalability. The 2,000th ECP chamber shipment underscores growing commercial penetration. With $1 billion in net cash and a long-term revenue target of $4 billion, this Zacks Rank #1 company's expanding product cycle and financial strength support clear near-term upside.

GDS Holdings is poised for a constructive near-term trajectory, underpinned by strengthening fundamentals and rising AI-driven demand in China's data center market. As of June 30, 2026, total committed and pre-committed area grew 18.2% year over year to 784,802 sqm, with area under construction surging 43.9% quarter over quarter to 170,355 sqm, signaling an accelerating development pipeline. A pre-commitment rate of 89.2% on this construction pipeline underscores robust, near-certain revenue visibility. Management has consequently raised its full-year 2026 revenue guidance to RMB12,700-RMB13,000 million and lifted adjusted EBITDA guidance to RMB5,900-RMB6,100 million. Capital expenditure guidance has been increased to approximately RMB10,000M, reflecting this Zacks Rank #2 (Buy) company's confidence in capturing record sales commitments. A liquidity cushion of $2.2 billion and GDS' landmark MSCI AAA ESG upgrade in July 2026 further strengthen its institutional investment appeal.

Kingsoft Cloud is positioned at a compelling inflection point, with its AI cloud business emerging as the primary structural growth engine. AI cloud gross billings now constitute 56% of public cloud revenues, having grown 82% year over year through June 2026, driven by accelerating enterprise demand for intelligent computing infrastructure and Model-as-a-Service offerings. Notably, this Zacks Rank #2 company crossed a key profitability threshold, recording positive GAAP operating margin for the first time, while adjusted operating profit margin reached 4%. Total revenues achieved a record RMB3,072 million. Adjusted gross margin expanded sequentially to 15.4%, reflecting improved AI infrastructure economics. Operating expenses declined 33% year over year, demonstrating meaningful operating leverage. Capital expenditure of RMB3.3 billion in second-quarter 2026 underscores management's conviction in sustaining this AI-led trajectory.

Published in artificial-intelligence china semiconductor tech-stocks

Checking in to see what billionaire investors are doing is a great way to source ideas for your own portfolio. One whom I follow is Stanley Druckenmiller, a former hedge fund manager who now runs the Duquesne Family Office. No later than 45 days after the end of each quarter, organizations that have more than $100 million under management are required to file a Form 13F with the SEC, which discloses their holdings at the end of that quarter. By comparing these forms with the prior ones, we can get some insights into what moves they made during the period.

Druckenmiller made some major purchases in Q2, including boosting its stake in Taiwan Semiconductor (TSM -2.29%) by nearly 20%. The chip foundry giant is now the Duquesne Family Office's second-largest holding. However, those purchases all happened by June 30. So the question is: Is Taiwan Semiconductor stock still a buy now?

Image source: The Motley Fool.

Because 13F forms only describe a fund's end-of-quarter holdings, Druckenmiller could have bought these new TSMC shares any time between April 1 and June 30. Right now, the stock is down by more than 10% from the high it established at the end of June, but it's up over 20% from April 1. So, depending on when Druckenmiller bought shares, today's price may or may not be cheaper than when he got in.

But that doesn't matter. What really matters is where Taiwan Semiconductor is heading, and I think the future looks bright for it.

Taiwan Semiconductor is the world's largest logic chip manufacturer, and it works with nearly every leading tech firm to fabricate the chips they design. While there is some geopolitical risk to its operations due to Taiwan's complicated relationship with nearby China, the company has invested over $200 billion in a manufacturing complex in Arizona, bringing more chip production to the U.S. This doesn't eliminate the risk, but it does reduce it.

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In the meantime, Taiwan Semiconductor is bullish on the AI chip trend, and its CEO expects elevated chip demand to last through at least 2029 or 2030. There could be continual high demand beyond that due to the creation of the AI industry, but nobody knows what long-term conditions in that space will look like. However, the bullish outlook for chip sales makes Taiwan Semiconductor an intriguing stock to buy, especially at its current valuation.

TSM PE Ratio (Forward) data by YCharts.

TSMC is trading within its normal valuation range for this time of year and at less than 20 times next year's expected earnings. If it can continue its current growth rate over the next few years, 20% to 30% gains per year could be expected from the stock, easily outpacing the broader market. That makes Taiwan Semiconductor an excellent stock to buy now and hold on to, as the AI arms race is far from over.

Predicting which company will be the ultimate winner in artificial intelligence (AI) isn't easy. One may say it will be the AI companies like OpenAI or Anthropic that will be the winners. Others may point to hardware companies like Advanced Micro Devices (AMD -2.33%) or Nvidia (NVDA -4.58%). While I tend to lean toward the latter, there's no way to determine whether Nvidia's or AMD's hardware will end up being the most commonly deployed by AI hyperscalers.

Instead, I think there's one pick that will be the ultimate winner, and it stands to benefit regardless of which company has the best AI model and what computing units are used to run the workloads: Taiwan Semiconductor Manufacturing (TSM -2.29%).

Image source: Getty Images.

Taiwan Semiconductor has cornered the logic chip market Taiwan Semiconductor is in a unique place in the AI arms race. Companies like AMD and Nvidia don't build any computing units; they just design the products and farm out manufacturing to other companies. These units obviously contain a lot of chips, and Taiwan Semiconductor is the world's largest and most advanced semiconductor foundry.

According to research by The Motley Fool, Taiwan Semiconductor accounted for about 72% of global foundry revenue at the end of 2025. That's a massive chunk of the market, and with several companies making up the remaining portion, there's really no other option in the industry outside of Taiwan Semiconductor.

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So, regardless of whether AMD or Nvidia likes to work with TSMC, they're forced to because it's the only one with the production capacity available to meet the supply demands of these companies. Taiwan Semiconductor has remained a key partner for many companies.

Due to Taiwan Semiconductor's neutral position, as long as there is increased spending on AI over the next few years, it's in the driver's seat to capitalize. Furthermore, it sees elevated demand lasting for a while. During TSMC's last quarterly conference call, CEO C.C. Wei told investors that he expects elevated chip demand to last through at least 2029 or 2030. That's several more years of strong growth, and with TSMC continuously launching new chip technology, it has several built-in price hikes along the way.

Taiwan Semiconductor is an excellent company at the epicenter of the AI build-out. Regardless of the outcome of AI, Taiwan Semiconductor will be a winner, making it one of the safest stocks to invest in this sector.

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

Taiwan Semiconductor Manufacturing (TSM -2.11%) has clocked respectable gains of 35% on the stock market in 2026 so far. However, the foundry giant's returns pale in comparison to the 61% spike in the PHLX Semiconductor Sector index this year.

Popularly known as TSMC, the Taiwan-based foundry and semiconductor packaging specialist is one of the world's most important companies. It manufactures chips for tech giants such as Nvidia (NVDA -2.91%), Qualcomm, Apple, Advanced Micro Devices, Sony, and many others. Importantly, TSMC has been growing at a robust pace this year, clocking a 37% increase in revenue in the first seven months.

Nvidia, one of TSMC's most important customers, will report its quarterly results after the market closes on Aug. 26. There is a solid chance that Nvidia's report will give TSMC stock a big boost. Let's see why that may be the case.

Image source: TSMC.

Nvidia is set to deliver a blockbuster quarter, and that's good news for TSMCNvidia is expected to account for more than 20% of TSMC's revenue this year, according to Taiwan-based newspaper Economic Daily News. The chip giant is TSMC's largest customer.

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Nvidia will start shipping its latest generation Vera Rubin artificial intelligence (AI) chip systems to customers in the second half of 2026. The production of these chips is predicted to ramp up significantly over the next couple of years, according to third-party reports. And now, Bloomberg reports that Nvidia could raise prices of its AI chips by more than 15%.

Nvidia CEO Jensen Huang remarked earlier this year that the company has a massive order book worth a whopping $1 trillion for its Blackwell and Vera Rubin chips for 2026 and 2027. Also, Nvidia's entry into the stand-alone server processor market has opened another phenomenal growth opportunity for the company.

So, there is a strong possibility of Nvidia's quarterly numbers crushing Wall Street's expectations on Aug. 26. The company anticipates $91 billion in revenue for fiscal Q2, which will be a record. Its top line is on track to increase by 95% year over year, indicating an acceleration from its fiscal Q1 revenue growth of 85%.

The company's healthy order book, the arrival of a new generation of chips, and potential price hikes suggest its guidance could be better than Wall Street has penciled in. Consensus estimates project an 82% year-over-year increase in Nvidia's revenue in fiscal Q3, to another record high of $103.8 billion. However, we have already seen that Nvidia's growth rate is picking up this year, and the catalysts discussed above could help it sustain that trajectory.

Nvidia's strong showing should have a positive impact on the semiconductor sector, especially TSMC. Financial newspaper Nikkei Asia reported last month that TSMC could increase the price of its foundry services by 10% in 2027. Bloomberg's report that Nvidia is planning a 15% price hike suggests that TSMC will indeed charge more for its chipmaking services.

As a result, I won't be surprised to see TSMC's growth rate accelerating. The following chart shows that analysts have been gradually increasing their revenue expectations for TSMC.

TSM Revenue Estimates for Current Fiscal Year data by YCharts

Also, the potential price hikes TSMC is reportedly set to implement should ideally lead to a robust increase in its bottom line. So it is easy to see why the company's earnings-per-share expectations have been rising.

TSM EPS Estimates for Current Fiscal Year data by YCharts

Here's why TSMC seems primed for a bull runAnalysts are expecting a 59% increase in TSMC's earnings per share in 2026 to $16.90. However, the previous chart indicates that the growth rate could drop in 2027 before it steps up in 2028.

However, TSMC can outperform market expectations. The AI chip market's revenue is poised for a major jump by 2030, which should help TSMC sustain its robust growth, as it is the world's leading foundry. Not surprisingly, there has been a sharp jump in TSMC's long-term earnings growth expectations.

TSM EPS LT Growth Estimates data by YCharts

Assuming TSMC's earnings increase at an annual rate of 35% over the next five years, its earnings per share could reach $47.75 per share in 2030 (using 2025's earnings per share of $10.65 as the base). If this AI stock trades at 24.1 times earnings at that time (in line with the tech-laden Nasdaq-100 index's forward earnings multiple), its price could jump to $1,150.

That's 182% above its current stock price, suggesting TSMC could make investors significantly richer over the long run. That's why it would be a good idea to buy this semiconductor stock ahead of Nvidia's report, as strong results from its biggest customer could trigger a bull run.

Taiwan Semiconductor Manufacturing TSM , the world's largest contract chipmaker, slid approximately 2.3% to $409.41 Monday morning as the chip selloff spread fast. Samsung Electronics SSNLF crashed 9%. Micron MU and SK Hynix HXSCL sank with it. Investors were not waiting for Nvidia's next update—they were cutting risk first.

But TSMC's growth engine is still running red-hot. July revenue surged 44.7% year over year to NT$467.58 billion. Management has raised its 2026 capital-spending plan to between $60 billion and $64 billion as Nvidia, Apple, AMD, Broadcom and major cloud operators scramble for leading-edge capacity. Demand is huge. So is the bet.

Now Nvidia NVDA holds the match. A powerful August 26 outlook would make TSMC's expansion look perfectly timed. Any hint of cooling orders would make those enormous fabrication commitments look far more dangerous. The valuation leaves little room for disappointment: at $409.41, the stock trades 15.47% above its $354.56 GF Value estimate. Monday's decline was not a demand collapse. It was a warning that investors want Nvidia to justify every dollar of that premium.

Incredible demand for artificial intelligence (AI) compute has driven sales at some of the biggest chipmakers to new heights. Nvidia has been one of the biggest beneficiaries of demand for compute, as its GPUs offer unparalleled computing power. Advanced Micro Devices is also seeing strong demand for its competing GPUs. Meanwhile, Broadcom has emerged as a key partner for several hyperscalers designing their own chips for AI training and inference.

But the biggest winner in AI semiconductors won't be any of those massive chipmakers. It's the company with both the technology and the scale to support the growing semiconductor industry. Here's why Taiwan Semiconductor Manufacturing (TSM +0.71%) will emerge as the biggest winner of all among the semiconductor stocks.

Image source: Getty Images.

After years of incredible growth for Nvidia and AMD, there's cause for concern about the future of their businesses and the place of their chips in hyperscale data centers. Some of the biggest concerns regarding hyperscale build-outs are the costs. Capital constraints are becoming a meaningful factor in some buying decisions for these companies, as they grow increasingly reliant on debt to fuel their continued build-outs.

While GPUs will always have a place in AI data centers, a growing portion of chips are custom silicon. Amazon said the majority of its new chip purchases will be its own Trainium chips this year. CEO Andy Jassy said using Trainium chips saves the company tens of billions of dollars in capital expenditures each year. Likewise, Alphabet is using more and more of its own chips, TPUs, and it has started selling TPUs to select third parties.

To that end, investors may think the biggest winners will be the chipmakers hyperscalers partner with to design custom AI accelerators. Google's TPUs are built on top of Broadcom's IP. But those designs tend to be more fickle. Google is reportedly in talks with Marvell Technology for new TPU designs. Marvell once held the design for Amazon's Trainium chips, but the third and fourth generations of the chip design went to AIChip.

But regardless of who designs the chips for training and running artificial intelligence in hyperscale data centers, they all rely on TSMC to print and package those chips. That's a constant, unlikely to change, given TSMC's significant technological lead and massive scale.

The competitive advantages create a virtuous cycle TSMC is the world's largest contract chip manufacturer. It accounted for 73% of all spending on third-party manufacturing in the first quarter of 2026, and that share has increased over the last few years as AI accelerators have fueled spending growth. AI chips require the most advanced manufacturing technology to achieve peak performance. That's where TSMC can separate itself from the competition.

Even as some competitors begin to make advances on TSMC's technology in certain edge cases, the Taiwanese company also benefits from its massive scale. Given the significant demand for AI chips, no other semiconductor manufacturer has the capacity to print and package chips at the required quality and speed. Even TSMC itself is facing capacity shortages. That's why management is spending another $60 billion to $64 billion in capital expenditures this year, up from $40.9 billion last year.

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TSMC's scale also allows it to spend heavily on research and development to produce the next generation of technology. And with a roster of big-name clients, it can work closely with engineering teams to ensure it meets their forthcoming needs. As a result, it can maintain a significant technological lead by outspending the competition, even if R&D accounts for just 6% of total revenue.

That creates a virtuous cycle. TSMC wins big contracts, builds out more capacity, spends more on R&D, and wins new big contracts that only it has the capacity to serve. The strong demand from the AI boom has also enabled it to raise prices across its manufacturing services, resulting in very strong gross margins even as it ramps up new technology (which typically weighs on gross margins).

Despite the strong growth projected for the business, investors are only paying 24.5 times forward earnings expectations. Considering analysts are currently projecting earnings-per-share growth of 30% over the next two years, that's an incredible price to pay for the dominant business in the industry.

Adam Levy has positions in Alphabet, Amazon, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Broadcom, Marvell Technology, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.