Optional product analytics
With your permission, we use privacy-limited analytics to understand which research journeys work. We do not run advertising trackers or session replay. You can change this choice in Preferences. Read the Privacy Policy.
Priced at a 20% premium to street internal valuation cross-checks, reflecting conviction in prolonged pricing power.
The massive $554 mid-point relies heavily on near-term AI forward earnings visibility.
TSM is the dominant global semiconductor foundry, leading in advanced nodes. Massive AI-driven demand from customers like Nvidia and AMD is driving strong near-term revenue growth and high CapEx, securing its position as vital infrastructure.
TSM is the dominant global semiconductor foundry, leading in advanced nodes. Massive AI-driven demand from customers like Nvidia and AMD is driving strong near-term revenue growth and high CapEx, securing its position as vital infrastructure.
Process technology leadership (dominant in 3nm/2nm).
Massive capital scale creating insurmountable barriers to entry.
The massive $554 mid-point relies heavily on near-term AI forward earnings visibility.
Strong Buy given dominant market positioning and 34.57% discount to $554 fair value.
Taiwan Semiconductor Manufacturing Company Limited, together with its subsidiaries, manufactures, packages, tests, and sells integrated circuits and other semiconductor devices in Taiwan, China, Europe, the Middle East, Africa, Japan, the United States, and internationally. It provides various wafer fabrication processes, such as processes to manufacture complementary metal- oxide-semiconductor (CMOS) logic, mixed-signal, radio frequency, embedded memory, bipolar CMOS mixed-signal, and others. The company also involved in providing customer and engineering support services; manufacturing of masks; investment in technology start-up companies; research, designing, developing, manufacturing, packaging, testing, and sale of color filters; and investment activities. Its products are used in high performance computing, smartphones, Internet of things, automotive, and digital consumer electronics. Taiwan Semiconductor Manufacturing Company Limited was incorporated in 1987 and is headquartered in Hsinchu City, Taiwan.
Under a severe cyclical downturn compounded by geopolitical sanctions, TSM's heavy fixed CapEx would crush margins. FCF would compress violently as revenue drops against structural depreciation burdens.
Process technology leadership (dominant in 3nm/2nm).
Massive capital scale creating insurmountable barriers to entry.
High switching costs for fabless customers due to custom design rules.
Intangible assets in process IP and ecosystem partnerships.
Economic profit is supported when reported returns exceed the company cost-of-capital hurdle.
Unavailable
FCF cliff sensitivity is not model-supported in this run; use the discount-rate and terminal-growth grid as the primary valuation pressure test.
Monitor earnings quality, guidance, and valuation-sensitive operating metrics.
Monitor earnings quality, guidance, and valuation-sensitive operating metrics.
Monitor earnings quality, guidance, and valuation-sensitive operating metrics.
Intensive CapEx cycle peaking, creating a high barrier to entry but suppressing near-term free cash flow yields.
Hyper-growth driven by generational AI infrastructure buildout and data center modernization.
Digestion phase where hyperscaler CapEx normalizes, exposing massive semiconductor capacity additions.
Intensive CapEx cycle peaking, creating a high barrier to entry but suppressing near-term free cash flow yields.
Strong Buy. TSM is the definitive infrastructure play for the AI generation, with an unmatched moat justifying its CapEx requirements and a compelling 35% upside to our $554 fair value.
Upside case: Priced at a 20% premium to street internal valuation cross-checks, reflecting conviction in prolonged pricing power. Downside case: The massive $554 mid-point relies heavily on near-term AI forward earnings visibility.
Capture your own thesis, position size, and follow-up questions. Stays on this device, only you can see it.
Overcapacity following the current massive CapEx cycle crashes utilization. AI demand decelerates, and geopolitical tensions place a structural discount on the stock's valuation.
A military escalation or blockade halting all fab operations, preventing global shipments and destroying terminal value.
Hyperscalers slash CapEx after realizing insufficient ROI on AI workloads, cratering advanced node utilization.
Intel successfully executes 18A and regains technical supremacy, siphoning major fabless clients away from TSM.
The five developments that would weaken our investment case.
Major compute clients revising wafer commitments downward reduces leading-edge fab utilization, stalling top-line momentum and signaling broader enterprise demand moderation across artificial intelligence hardware accelerators.
Current:31.6% for the period ended 2025-12-31
Alert if< 10.0% over trailing twelve months
Operational delays or initial ramp yield issues on advanced manufacturing processes elevate unit production costs, compressing operating margins and diminishing economic returns on massive fab capital investments.
Current:50.8% for the period ended 2025-12-31
Alert if< 42.0% for two consecutive quarters
Severe gross margin compression reflects heavy unabsorbed fixed depreciation burdens from underutilized advanced cleanrooms, significantly impairing gross cash generation and unit profitability across mature and leading foundry nodes.
Current:59.9% for the period ended 2025-12-31
Alert if< 45.0% for two consecutive quarters
Prolonged high capital expenditures without matching revenue expansion depress returns on invested capital, signaling misallocated capacity and eroding long-term shareholder value creation across advanced semiconductor packaging and fabrication.
Current:25.3% as of the report's 2026-05-10 analysis date
Alert if< 18.0% over trailing twelve months
Losing exclusive leading-edge foundry contracts to rival fabricators erodes core pricing power and volume throughput, shrinking net profit margins and disrupting multi-year earnings compounding for the foundry business.
Current:44.6% for the period ended 2025-12-31
Alert if< 35.0% for two consecutive quarters
Each lens answers a different valuation question. Only included lenses set Fair value; floors and diagnostics provide context.
Project SBC-adjusted EPS, discount each year's earnings at cost of equity, then add a Gordon-growth terminal value.
Project EPS through the explicit advantage period, fade growth as competition catches up, and discount the full stream at cost of equity.
Apply a terminal P/E to the dated forward EPS path, then discount that future share value back to the analysis date.
Convert the revenue and margin path into after-tax free cash flow, discount the annual per-share amounts and at , then adjust for signed per current share.
Multiply the peer median PEG by this stock's forecast growth to derive an implied forward P/E, then apply it to forward EPS.
Solve for the growth rate that makes the model value equal the report-date share price.
Prolonged AI super-cycle sustains hyper-growth. TSM completely dominates advanced nodes, expanding margins as competitors fail to execute, supporting a premium terminal multiple.
TSM navigates the AI boom successfully with robust visibility, balancing heavy CapEx constraints. Multi-stage moat fade values the transition from hyper-growth to steady infrastructure leadership.
Monitor earnings quality, guidance, and valuation-sensitive operating metrics.
Warning level: < 10.0% over trailing twelve months. Major compute clients revising wafer commitments downward reduces leading-edge fab utilization, stalling top-line momentum and signaling broader enterprise demand moderation across artificial intelligence hardware accelerators.
Warning level: < 42.0% for two consecutive quarters. Operational delays or initial ramp yield issues on advanced manufacturing processes elevate unit production costs, compressing operating margins and diminishing economic returns on massive fab capital investments.
Warning level: < 45.0% for two consecutive quarters. Severe gross margin compression reflects heavy unabsorbed fixed depreciation burdens from underutilized advanced cleanrooms, significantly impairing gross cash generation and unit profitability across mature and leading foundry nodes.
Warning level: < 18.0% over trailing twelve months. Prolonged high capital expenditures without matching revenue expansion depress returns on invested capital, signaling misallocated capacity and eroding long-term shareholder value creation across advanced semiconductor packaging and fabrication.
Warning level: < 35.0% for two consecutive quarters. Losing exclusive leading-edge foundry contracts to rival fabricators erodes core pricing power and volume throughput, shrinking net profit margins and disrupting multi-year earnings compounding for the foundry business.
| $2,161.74B |
| $2,894.31B |
| $3,809.05B |
| +18.9% |
| Gross profit | $1,348.35B | $1,175.11B | $1,624.35B | $2,281.29B | +19.2% |
| Operating income | $1,155.82B | $991.32B | $1,416.34B | $2,054.03B | +21.1% |
| Net income | $992.92B | $851.74B | $1,158.38B | $1,697.60B | +19.6% |
| EPS (diluted) | $196.00 | $161.70 | $226.25 | $331.25 | +19.1% |
| EBITDA | $1,593.08B | $1,523.51B | $2,079.13B | $2,742.12B | +19.8% |
| R&D | $163.26B | $182.37B | $204.18B | $246.43B | +14.7% |
| SG&A | $63.45B | $71.46B | $96.89B | $99.22B | +16.1% |
Capital allocation should be evaluated against reinvestment needs, balance-sheet strength, and shareholder returns.
| Revenue | 3,809,054,300,000 |
|---|---|
| Cost of revenue | 1,527,760,300,000 |
| Gross profit | 2,281,294,000,000 |
| Operating expenses | 345,198,400,000 |
| Operating income | 1,936,095,600,000 |
| Non-operating items and tax | -238,491,600,000 |
| Net income | 1,697,604,000,000 |
| Total assets | 7,932,842,500,000 |
|---|---|
| Cash | 2,767,856,400,000 |
| Current assets | 3,817,130,800,000 |
| Total liabilities | 2,536,623,300,000 |
| Current liabilities | 1,522,414,000,000 |
| Shareholders’ equity | 5,355,038,700,000 |
Point-in-time financial data used in the 2026-05-10 analysis.
| Period | Revenue | EBITDA | Net income | Operating cash flow | Free cash flow | Capex | Depreciation and amortization | Stock-based compensation | Share repurchases | Dividends paid | Net debt issuance | Investing cash flow | Financing cash flow | Beginning cash | Ending cash | Cash and investments | Total debt | Operating margin | ROIC | WACC | ROIC − WACC spread |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022-12-31 | 2.3T | 1.6T | 992.9B | 1.6T | 521B | 1.1T | 437.3B | 302.4M | 871.6M | 285.2B | 82B | — | — | — | — | 1.3T | 888.2B | 49.5% | — | — | — |
| 2023-12-31 | 2.2T | 1.5T | 851.7B | 1.2T | 286.6B | 955.4B | 532.2B | 483M | 0 | 291.7B | 93.3B | — | — | — | — | 1.5T | 956.3B | 42.6% | — | — | — |
| 2024-12-31 | 2.9T | 2.1T | 1.2T | 1.8T | 861.2B | 965B | 662.8B | 1.2B | 3.1B | 363.1B | 26.5B | — | — | — | — | 2.1T | 1T | 45.7% | — | — | — |
| 2025-12-31 | 3.8T | 2.7T | 1.7T | 2.3T | 992.4B | 1.3T | 688.1B | 1.2B | 0 | 466.8B | 37.4B | — | — | — | — | 2.8T | 1.1T | 50.8% | — | — | — |
TSM trades at 21.3x forward earnings against a peer median of 23.7x; EV/EBITDA of 2.9x against a peer median of 46.1x; 6 peers.
| Accumulate at current levels ($411.68), taking advantage of the ~35% discount to fair value. |
Add depreciation to net income, subtract maintenance capex, divide by diluted shares, and apply a normalized valuation multiple.
| AVGO |
| Broadcom Inc. |
| 23.7x |
| 29.8x |
| 53.9x |
| 33.4% |
| 44.9% |
| MU | Micron Technology Inc. | 7.3x | 14.5x | 22.8x | 39.8% | 67.6% |
| AMD | Advanced Micro Devices Inc. | 35.3x | 19.8x | 98.8x | 8.1% | 14.4% |
| INTC | Intel Corporation | 81.6x | 11.7x | 46.1x | -2.9% | 6.9% |
