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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:
$279.00
▲(16.09%Upside)
TSMC's strong financial performance and positive earnings call sentiment are the primary drivers of its overall stock score. The company's robust revenue growth, efficient operations, and strategic positioning in advanced technologies contribute significantly. However, the high valuation and technical indicators suggest caution due to potential short-term volatility.
Positive Factors
AI Demand
TSMC emphasized that AI demand continues to be 'very healthy and very strong.'
Earnings
2Q results beat expectations, with GPM aided by higher utilization and cost efficiencies.
Revenue Growth
TSMC lifted its 2025 revenue growth forecast to 30% in USD term.
Negative Factors
FX Pressures
FX-driven pressures are expected to lower gross profit margins in the latter half of 2025.
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 manufacturing services, offering foundry services to a diverse client base that includes leading technology companies and semiconductor design firms. The company's revenue model is anchored in high-volume production of advanced chips, leveraging cutting-edge process technologies to meet the demands of sectors such as mobile and high-performance computing. A significant portion of TSMC's income is derived from long-term contracts with major clients, including notable partnerships with technology giants like Apple, AMD, and Qualcomm. These relationships enable TSMC to secure consistent orders and optimize its production capacity. Additionally, TSMC invests in continuous research and development to maintain its technological edge, further enhancing its ability to command premium pricing for its leading-edge manufacturing capabilities.

TSMC Earnings Call Summary

Earnings Call Date:Jul 17, 2025
(Q2-2025)
|
% Change Since: 1.17%|
Next Earnings Date:Oct 16, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted strong revenue growth, particularly from advanced technologies and platforms like HPC and IoT. However, challenges such as foreign exchange headwinds, margin dilution from overseas fabs, and cautious guidance for the fourth quarter were noted. Despite these challenges, the long-term outlook remains positive due to robust AI and HPC demand.
Q2-2025 Updates
Positive Updates
Strong Revenue Growth
Revenue increased 11.3% sequentially in NT and 17.8% sequentially in USD, reaching TWD 30.1 billion, exceeding second quarter guidance.
Record EPS and ROE
Second quarter EPS was TWD 15.36, up 60.7% year-over-year, and ROE was 34.8%.
High Demand for Advanced Technologies
3-nanometer process technology contributed 24% of wafer revenue, while 5-nanometer and 7-nanometer accounted for 36% and 14% respectively. Advanced technologies accounted for 74% of wafer revenue.
Strong Platform Growth
HPC revenue increased 14% quarter-over-quarter, accounting for 60% of second quarter revenue. IoT revenue also increased 14%.
Positive AI and HPC Outlook
AI and HPC-related demand remains strong, with expected full-year revenue growth of around 30% in USD terms.
Negative Updates
Decrease in Gross Margin
Gross margin decreased 0.2 percentage points sequentially to 58.6% due to unfavorable foreign exchange rates and margin dilution from overseas fabs.
Foreign Exchange Headwinds
The NT dollar appreciation negatively impacted second quarter revenue by about 4.4% in NT and gross margin by about 180 basis points.
Overseas Fab Margin Dilution
Margin dilution from overseas fabs, including those in Arizona and Kumamoto, is expected to continue, impacting gross margins by 2% to 4% annually in the next five years.
Fourth Quarter Revenue Concerns
Guidance suggests a potential decline in fourth quarter revenue due to conservatism amidst macroeconomic uncertainties and tariffs.
Company Guidance
During TSMC's second quarter 2025 earnings call, the company provided guidance for the third quarter, projecting revenue between TWD 31.8 billion and USD 33 billion, which represents an 8% sequential increase and a 38% year-over-year increase at the midpoint. Gross margin is expected to be between 55.5% and 57.5%, while operating margin is anticipated to range from 45.5% to 47.5%. The guidance was based on an exchange rate assumption of $1 to TWD 29. TSMC also maintained its 2025 capital budget between USD 38 billion and USD 42 billion, despite challenges posed by an unfavorable foreign exchange rate and margin dilution from overseas fabs, such as those in Arizona and Kumamoto. The company remains committed to leveraging its manufacturing technology leadership and large-scale production base to manage these headwinds and achieve a long-term gross margin of 53% or higher.

TSMC Financial Statement Overview

Summary
TSMC shows strong financial performance 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.
BreakdownDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue2.89T2.16T2.26T1.59T1.34T
Gross Profit1.62T1.18T1.35T819.54B711.13B
EBITDA1.98T1.52T1.59T1.09T918.55B
Net Income1.17T838.50B992.92B592.36B510.74B
Balance Sheet
Total Assets6.69T5.53T4.96T3.73T2.76T
Cash, Cash Equivalents and Short-Term Investments2.42T1.69T1.59T1.21T802.15B
Total Debt1.05T956.26B888.17B749.07B365.19B
Total Liabilities2.37T2.05T2.00T1.55T910.09B
Stockholders Equity4.29T3.46T2.95T2.17T1.85T
Cash Flow
Free Cash Flow870.17B286.57B520.97B262.72B301.19B
Operating Cash Flow1.83T1.24T1.61T1.11T822.67B
Investing Cash Flow-864.84B-906.12B-1.19T-836.37B-505.78B
Financing Cash Flow-346.30B-204.89B-200.24B136.61B-88.62B

TSMC Technical Analysis

Technical Analysis Sentiment
Positive
Last Price240.33
Price Trends
50DMA
213.93
Positive
100DMA
190.37
Positive
200DMA
193.74
Positive
Market Momentum
MACD
7.72
Positive
RSI
63.78
Neutral
STOCH
52.88
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 240.33 is above the 20-day moving average (MA) of 232.34, above the 50-day MA of 213.93, and above the 200-day MA of 193.74, indicating a bullish trend. The MACD of 7.72 indicates Positive momentum. The RSI at 63.78 is Neutral, neither overbought nor oversold. The STOCH value of 52.88 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 (63)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
83
Outperform
$173.47B16.0942.21%2.15%16.15%32.28%
80
Outperform
$257.24B116.303.90%21.71%99.00%
80
Outperform
$150.08B22.7636.37%1.10%6.12%-5.66%
79
Outperform
$274.08B27.0156.14%0.92%27.09%40.94%
77
Outperform
$997.97B26.7133.29%<0.01%38.65%
63
Neutral
S$643.56M16.150.69%4.12%0.35%-29.83%
56
Neutral
$102.46B-18.66%2.13%-3.97%-562.40%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TSM
TSMC
240.33
81.83
51.63%
AMD
Advanced Micro Devices
158.65
20.33
14.70%
AMAT
Applied Materials
187.01
-13.42
-6.70%
ASML
ASML Holding
716.93
-139.04
-16.24%
INTC
Intel
23.49
-7.41
-23.98%
QCOM
Qualcomm
159.88
-11.74
-6.84%
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: Jul 18, 2025