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TSMC (TSM)
NYSE:TSM
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TSMC (TSM) AI Stock Analysis

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TSM

TSMC

(NYSE:TSM)

Rating:77Outperform
Price Target:
$264.00
▲(12.24% Upside)
TSMC's overall stock score reflects its strong financial performance and positive earnings call, which highlight robust revenue growth and strategic global expansion. While technical analysis and valuation present some concerns, the company's competitive advantages in advanced technology and market leadership position it well for future growth.
Positive Factors
AI Demand
TSMC emphasized that AI demand continues to be 'very healthy and very strong,' supporting a positive outlook.
Revenue Growth
TSMC lifted its 2025 revenue growth forecast to 30% in USD terms, indicating strong future performance.
Tariff Exemption
Companies with substantial U.S. manufacturing investments, like TSMC, are likely to be exempt from proposed semiconductor tariffs, reducing downside risks.
Negative Factors
FX Pressures
FX-driven pressures are expected to lower gross profit margins in the latter half of 2025.
Macro Uncertainties
TSMC remains cautious on macro uncertainties and implied guidance for Q4 represents a decline.
Tariff Risks
There are tariff risks which imply that fourth-quarter sales could decline.

TSMC (TSM) vs. SPDR S&P 500 ETF (SPY)

TSMC Business Overview & Revenue Model

Company DescriptionTaiwan 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 a range of wafer fabrication processes, including processes to manufacture complementary metal- oxide-semiconductor (CMOS) logic, mixed-signal, radio frequency, embedded memory, bipolar CMOS mixed-signal, and others. The company also offers customer and engineering support services; manufactures masks; and invests in technology start-up companies; researches, designs, develops, manufactures, packages, tests, and sells color filters; and provides investment services. Its products are used in high performance computing, smartphones, Internet of things, automotive, and digital consumer electronics. The company was incorporated in 1987 and is headquartered in Hsinchu City, Taiwan.
How the Company Makes MoneyTSMC generates revenue primarily through its semiconductor fabrication services. The company operates on a business model where it manufactures chips for clients who design their own semiconductors, charging them based on the complexity and volume of the chips produced. Key revenue streams include contracts with major technology firms such as Apple, Nvidia, and Qualcomm, which account for a significant portion of TSMC's sales. Additionally, TSMC invests heavily in research and development to enhance its manufacturing processes and technologies, allowing it to offer state-of-the-art production capabilities, including advanced nodes like 5nm and 3nm processes. Partnerships with leading technology companies also bolster TSMC's earnings, as it plays a critical role in the global semiconductor supply chain, ensuring its clients have access to the latest manufacturing technologies. The increasing demand for high-performance chips in various sectors, including AI and IoT, further contributes to TSMC's revenue growth.

TSMC Earnings Call Summary

Earnings Call Date:Jul 17, 2025
(Q2-2025)
|
% Change Since: |
Next Earnings Date:Oct 16, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted strong revenue growth, driven by advanced technology demand and global expansion plans. However, challenges such as foreign exchange impacts and margin dilution from overseas operations were evident. The company's robust performance in HPC and smartphone markets, coupled with record EPS, is tempered by concerns over ongoing exchange rate challenges and fab cost increases.
Q2-2025 Updates
Positive Updates
Strong Revenue Growth
Second quarter revenue increased 11.3% sequentially in NT and 17.8% in USD terms, surpassing the second quarter guidance, driven by strong demand for 3-nanometer and 5-nanometer technologies.
HPC and Smartphone Growth
HPC revenue increased 14% quarter-over-quarter to account for 60% of total revenue, while smartphone revenue grew by 7% to account for 27%.
Record EPS and ROE
EPS was TWD 15.36, up 60.7% year-over-year, and ROE was 34.8%.
Global Expansion Plans
TSMC announced plans to invest in multiple fabs globally, including six advanced wafer manufacturing fabs in Arizona, two packaging fabs, and a major R&D center, to meet strong AI and HPC demand.
Advanced Process Technology Leadership
3-nanometer process technology accounted for 24% of wafer revenue, with advanced technologies (7nm and below) making up 74% of total wafer revenue.
Negative Updates
Gross Margin Impacted by Foreign Exchange
Gross margin decreased 0.2 percentage points sequentially to 58.6% due to unfavorable foreign exchange rates and margin dilution from overseas fabs.
Overseas Fab Margin Dilution
Ramp-up of overseas fabs, especially in Arizona, led to margin dilution, with expectations of 2% to 4% dilution in the next 5 years.
Exchange Rate Challenges
The appreciation of the NT dollar against the USD negatively impacted second-quarter revenue by 4.4% and is expected to reduce third-quarter revenue by 6.6%.
Company Guidance
In the call, TSMC provided guidance for the third quarter of 2025, expecting revenue to be between TWD 31.8 billion and USD 33 billion, reflecting an 8% sequential increase and a 38% year-over-year increase at the midpoint. The company anticipates a gross margin of 55.5% to 57.5% and an operating margin between 45.5% and 47.5%, based on an exchange rate assumption of $1 to TWD 29. TSMC also maintained its 2025 capital budget at USD 38 billion to USD 42 billion. Despite challenges such as an unfavorable foreign exchange rate and margin dilution from overseas fabs, the company remains committed to leveraging its competitive advantages in manufacturing technology and scale to manage through these headwinds.

TSMC Financial Statement Overview

Summary
TSMC demonstrates strong financial health with robust revenue and profit growth, efficient operations, and a solid balance sheet. The company's low leverage and high equity ratio provide financial stability, while strong cash flow generation supports ongoing investments and shareholder returns.
Income Statement
85
Very Positive
TSMC shows strong financial performance with a consistent increase in total revenue, reaching TTM (Trailing-Twelve-Months) revenue of 3,140,917,320,000. The company maintains a high gross profit margin, currently at 57.43%, and net profit margin at 41.69%, indicating efficient cost control and profitability. The revenue growth rate from the previous annual report is 8.52%, showing positive growth. EBIT and EBITDA margins are robust at 47.12% and 69.93%, respectively, highlighting strong operational efficiency.
Balance Sheet
80
Positive
TSMC has a healthy balance sheet with a solid equity base, reflected in an equity ratio of 64.51%. The debt-to-equity ratio is low at 0.21, indicating low leverage and financial stability. Return on equity (ROE) is strong at 28.45%, showcasing effective use of shareholders' equity to generate profits. The high stockholders' equity and low total debt contribute to the company's strong financial position.
Cash Flow
78
Positive
TSMC's cash flow statement reveals strong cash generation with a free cash flow of 922,432,414,000 in the TTM period. The free cash flow growth rate is 6.00% from the previous annual report, indicating positive cash flow trends. The operating cash flow to net income ratio is 1.55, showing good cash conversion efficiency. The free cash flow to net income ratio is 0.71, reflecting the company's ability to generate cash relative to its net income.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue3.14T2.89T2.16T2.26T1.59T1.34T
Gross Profit1.80T1.62T1.18T1.35T819.54B711.13B
EBITDA2.22T1.98T1.52T1.59T1.09T918.55B
Net Income1.31T1.17T838.50B992.92B592.36B510.74B
Balance Sheet
Total Assets7.13T6.69T5.53T4.96T3.73T2.76T
Cash, Cash Equivalents and Short-Term Investments2.70T2.42T1.69T1.59T1.21T802.15B
Total Debt1.08T1.05T956.26B888.17B753.63B367.79B
Total Liabilities2.53T2.37T2.05T2.00T1.55T910.09B
Stockholders Equity4.56T4.29T3.46T2.95T2.17T1.85T
Cash Flow
Free Cash Flow922.43B870.17B286.57B520.97B262.72B301.19B
Operating Cash Flow2.04T1.83T1.24T1.61T1.11T822.67B
Investing Cash Flow-975.92B-864.84B-906.12B-1.19T-836.37B-505.78B
Financing Cash Flow-362.13B-346.30B-204.89B-200.24B136.61B-88.62B

TSMC Technical Analysis

Technical Analysis Sentiment
Positive
Last Price235.21
Price Trends
50DMA
235.47
Negative
100DMA
210.96
Positive
200DMA
200.64
Positive
Market Momentum
MACD
-0.56
Positive
RSI
50.43
Neutral
STOCH
43.24
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSM, the sentiment is Positive. The current price of 235.21 is below the 20-day moving average (MA) of 236.65, below the 50-day MA of 235.47, and above the 200-day MA of 200.64, indicating a neutral trend. The MACD of -0.56 indicates Positive momentum. The RSI at 50.43 is Neutral, neither overbought nor oversold. The STOCH value of 43.24 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSM.

TSMC Risk Analysis

TSMC disclosed 26 risk factors in its most recent earnings report. TSMC reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

TSMC Peers Comparison

Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
81
Outperform
$293.01B28.2156.14%0.90%27.09%40.94%
77
Outperform
$980.88B26.0033.29%1.15%38.65%57.18%
77
Outperform
$263.42B93.324.70%27.17%108.67%
69
Neutral
$125.53B18.7935.64%1.09%6.70%-5.95%
61
Neutral
$35.51B8.11-11.05%1.89%8.55%-8.72%
58
Neutral
$105.97B-19.24%0.52%-3.72%-2120.70%
54
Neutral
$18.33B28.15-1.01%-0.65%-114.26%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TSM
TSMC
235.21
80.14
51.68%
AMD
Advanced Micro Devices
161.79
27.44
20.42%
AMAT
Applied Materials
158.24
-14.71
-8.51%
ASML
ASML Holding
753.43
7.05
0.94%
INTC
Intel
24.61
5.72
30.28%
GFS
GlobalFoundries Inc
33.33
-6.79
-16.92%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Aug 23, 2025