Taiwan Semiconductor Manufacturing Company (TSM) stock, better known as TSMC, is on fire. After surging almost 25% over the past year, it has now joined the exclusive $1 trillion market cap club, one of only ten U.S.-listed companies to do so. This surge reflects a continued shift towards the Internet of Things (IoT) and the propagation of digital devices worldwide. With a key quarterly earnings announcement set for Thursday this week, TSMC stock is likely to experience severe price volatility, both pre- and post-earnings announcement.
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As a manufacturer of integrated circuits and semiconductors, TSMC is in a prime position to capitalize on prominent macro trends. And the semiconductor giant is doing just that. According to the most recent sales figures, there’s plenty of spare market capacity to grow into, which keeps me Bullish on TSMC despite its frothy valuation.
The Catalyst Behind TSMC’s Market Climb
TSMC’s primary growth driver stems from the explosive growth of AI, which is rapidly reshaping entire industries. As the world’s leading chip foundry, TSMC plays a critical role in this transformation, manufacturing the advanced semiconductors that power everything from smartphones to high-performance AI systems. Without TSMC, the AI momentum behind companies like Nvidia (NVDA) and AMD (AMD) would face severe bottlenecks.
TSMC’s edge lies in its cutting-edge 3nm and 5nm process nodes, keeping it ahead in a highly competitive market. The global demand for AI—from data centers to autonomous vehicles—is set to keep its fabs running at full capacity for years. While its Taiwan-based operations carry some geopolitical risk, its scale remains unmatched, and its gradual expansion into the U.S. helps offset concerns.
With AI still in its early innings, TSMC is uniquely positioned to ride the AI wave, cementing its role as a foundational pillar in the ongoing tech revolution.
Q2 Results: Proof of the AI Tailwind in Action
TSMC’s consolidated Q2 results haven’t dropped yet. Still, the preliminary figures already paint a powerful picture: revenue surged 40% year-over-year in the first half of 2025, reaching $60.8 billion, fueled largely by insatiable demand for AI chips. June alone brought in NT$263.7 billion ($8.2 billion), up 27% from the same month last year, though it slipped 18% from May due to the usual seasonal dip in smartphone orders.
Based on past reports and current industry momentum, I expect advanced technologies—particularly 3nm and 5nm chips—to account for just under 60% of TSMC’s wafer revenue. Even more impressive is the company’s ability to sustain gross margins above 57%, despite rising energy costs in Taiwan and the financial strain of global expansion. That kind of resilience underscores both its pricing power and operational discipline.
In April, TSMC posted earnings per share of $2.14, a 60.4% jump from last year. For Q2, EPS is projected to rise to $2.37, marking a 56% year-over-year gain. These growth figures highlight how efficiently TSMC scales its operations, and with continued strong demand for its cutting-edge nodes, the momentum is likely to carry well into the second half of the year.
Why TSM Stock Still Has Legs
With a $1 trillion market cap, it’s easy to assume TSMC’s rally has peaked—but the fundamentals suggest otherwise. Consensus estimates point to full-year EPS of $9.52, representing 35% growth, driven mainly by surging AI demand and TSMC’s irreplaceable position at the heart of the semiconductor ecosystem. That puts the stock at a forward P/E of 24—an entirely reasonable valuation considering the strength of its growth and the long runway AI provides for both revenue and earnings expansion.
More importantly, this full-year estimate implies a notable deceleration from the explosive EPS growth seen in Q1 and anticipated in Q2. But historically, analysts have tended to underestimate TSMC’s performance. If that pattern holds, actual earnings could easily exceed expectations, making the stock look even cheaper and potentially accelerating the current bullish momentum.
For context, Nvidia trades at 38x forward earnings. While Nvidia’s near-term EPS growth may be steeper, TSMC boasts a similarly powerful competitive moat. And with the broader semiconductor sector also trading at 24x forward earnings, the market is essentially assigning no premium to TSMC, despite its critical role in enabling the entire AI supply chain.
What is TSMC’s Price Target in 2025?
TSM stock is reaching new highs, almost on a daily basis, which explains why Wall Street continues to appoint a Strong Buy consensus rating to the stock. TSMC stock carries a Strong Buy consensus rating based on eight Buy, one Hold, and zero Sell ratings over the past three months. TSMC’s average stock price target of $236.38 implies approximately 2.5% upside potential over the next twelve months.
TSMC’s Growth Story Stays on Trend
TSMC’s $1 trillion milestone is a significant achievement, but it hardly signals the end of the road. The company has cemented its leadership in AI chip manufacturing, delivered a standout first half of 2025, and still trades at a valuation that suggests plenty of upside. While geopolitical risks and rising costs remain part of the equation, TSMC’s scale, cutting-edge technology, and strategic global expansion keep it on a clear growth trajectory.
Rather than peaking, TSMC appears to be building momentum. For investors, this represents an opportunity to own a foundational player in the AI revolution. And with demand for its stock likely to stay strong—thanks to its unmatched role in the semiconductor supply chain—the rally looks far from over.