Catalysts
- Are there any products or services that could move sales or earnings meaningfully?
The meat moving the needle right now is CoWoS packaging. The are bottlenecks that companies face in how they’re packaged. TSMC is ramping up capacity with this packing to hit 125k per month by 2026 which they’ve hit their goals previously. Only Broadcom and TSMC have this capability and can actually ship this.
The other piece is the N2 rollout which only kicked off at the end of 2025 so its in the process of scaling. They are expected to charge 10-20% premium for this which will drive revenue up along with the new A16 node later in the year.
The recent earnings call remarked they are preparing to increase capacity and capex investment to support customer growth even though they constantly sell out before mass production.
- Are there any industry tailwinds this stock is benefitting or hindered from?
TSMC expects to see a seen a big increase in annual growth for AI accelerators of 50% through to 2029 which is much larger than 20-30% from 2 years ago which leaves some doubt into whats realistic. Along with expansion into other countries (which has to be done due to their current location) the building of these factories will impact margins by 3%.
Revenue and Earnings
Looking at 5 years time we could predict revenue at $180 billion as their expansion and growth means their capacity will only get bigger. Earnings is project between $14-$16 per share for 26/27 so another 3 years could see it at $20 if they can retain their margins.
The Risks
China: while almost always simmering, a blockade or invasion with Taiwan only can happen, realistically in 2027. If it does, world markets will have a meltdown with TSMC at the forefront.
Competition: other companies especially Intel are producing faster and eloquent solutions with 18A is an example. Which leads to the final risk…
Trump and Tarrifs: the combination of Trump, tariffs and China means that whenever one of these makes the news, everything is affected. The costs of if we see further volatility in geo-political changes could mean eating into costs/margins and more reasons for NVIDIA, Apple, Qualcomm etc to move away.
Valuation
Earnings is forecasted to grow between 15% - 20% per year with it growing 48% last year which at a Price to Earnings at 26x.
The full year 2025 results
- EPS: NT$66.25 (up from NT$44.68 in FY 2024).
- Revenue: NT$3.81t (up 32% from FY 2024).
- Net income: NT$1.72t (up 48% from FY 2024).
- Profit margin: 45% (up from 40% in FY 2024). The increase in margin was driven by higher revenue.
Revenue is forecast to grow 16% p.a. on average during the next 3 years, compared to a 18% growth forecast for the Semiconductor industry in Taiwan.
Simply looking at the above you could get a fair value of $450.
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Disclaimer
The user mattttyb holds no position in NYSE:TSM. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
