Taiwan Semiconductor Manufacturing Company Limited

Stress testing demonstrates substantial downside vulnerability if hyperscale AI infrastructure spending decelerates or geopolitical risk escalates. With FY2025 capex reaching 1,285.59B TWD (33.67% of revenue), fab underutilization combined with higher cost structures in Arizona and European fabs would compress operating margins toward the historical trough of 45.68% seen in FY2024. Furthermore, a 200 bps elevation in the cost of equity to 12.62% compounded by multiple contraction to historical trough levels of 17.6x drives intrinsic value down toward 12.86 USD.

Wide

TSMC operates as the primary manufacturing foundation for global leading-edge computing, holding an effective monopoly on sub-5nm fabrication and advanced CoWoS packaging. This structural position produces sustained value-based pricing power.

The pure-play foundry model eliminates conflicts of interest with customers, cementing collaborative customer lock-in that competitors cannot replicate.

Taiwan Semiconductor Manufacturing Company Limited (TSM) trades at 21.4x forward earnings against a peer median of 28.2x. Its EV/EBITDA of 5.2x compares with a peer median of 48.5x. The comparison uses 4 peers: Monolithic Power Systems Inc., Broadcom Inc., Micron Technology Inc. and Advanced Micro Devices Inc., as of 2026-09-25.

We recommend a Sell rating on TSMC because the report-date price of 451.15 USD on 2026-09-24 trades at a 272% premium to our Fair value of 121.15 USD, presenting an unacceptable valuation risk despite exceptional manufacturing quality.³

Investors should avoid new capital commitments and systematically trim existing holdings, as any pause in AI accelerator spending or overseas cost overruns would trigger severe multiple contraction.