TSM Slides to $413.50 on Chip Rout as Q4 Guide Points to 58% Growth — Target $430 Then $472

Taiwan Semiconductor Manufacturing (NYSE: TSM) is getting sold on the best quarter in its history. The ADR traded at $413.50 at 10:26 a.m. ET Thursday, down $16.50 or 3.84% from Wednesday’s close of $430.00. Shares opened at $415.17, which also marked the session high so far, and slid to an intraday low of $407.15. Volume reached 9.74 million shares in the first hour, already near the 11.13 million three-month average.

The premarket set the tone early. TSM traded down 4.58% before the bell as the global semiconductor selloff deepened, then printed $416.19 at 8:48 a.m., down $13.81 or 3.21%. The open at $415.17 confirmed that sellers weren’t waiting for the earnings call details to sink in.

The valuation scale moved with it. At $413.50, TSM carries an intraday market capitalization of $2.145 trillion, down from roughly $2.23 trillion at Wednesday’s close. That is $85 billion in market value erased in one session, more than the entire market cap of most S&P 500 semiconductor companies.

The 52-week range frames the drawdown. TSM trades between $266.82 and $487.47 over the past year. At $413.50, the stock sits 15% below its 52-week high and 55% above the low. On October 2, it closed at $472.78 after a 2.96% gain, which puts Thursday’s price 12.5% below where it stood less than two weeks ago.

The Taipei listing fared better. Taiwan-listed TSMC shares lost 2% as the Taiex fell 3.41%. The ADR’s steeper 3.84% loss reflects the US session’s heavier selling in chip stocks rather than anything specific to the company’s numbers.

That gap between results and reaction defines Thursday. TSMC posted net income of NT$763.06 billion, up 68.7% year over year, beat profit estimates by NT$16.8 billion, beat its own revenue guidance, beat the top end of its operating margin guidance, and guided fourth-quarter revenue 14% higher sequentially. The stock fell anyway.

The market is not rejecting TSMC’s AI demand story. It is repricing the cost of capital applied to every company in the AI supply chain after a hot 6.3% US producer price print, a 14-basis-point swing in Treasury yields and a credit scare at CoreWeave. TSMC is caught in a sector-wide de-rating while its fundamentals accelerate. That divergence creates the setup for the forecast: a fundamentally stronger company at a lower price than two weeks ago.

Q3 Results: NT$1.49 Trillion Revenue and a 68.7% Profit Jump

The third-quarter numbers were clean across every line. Net revenue reached NT$1,494.24 billion, up 17.6% from the second quarter and 50.9% from a year earlier. In dollar terms, revenue hit $46.72 billion, above the company’s own $44.6 billion to $45.8 billion guidance and up 16.2% sequentially and 41.2% year over year.

Profit outpaced revenue. Net income attributable to shareholders reached NT$763.06 billion, up 8.0% from NT$706.56 billion in the second quarter and 68.7% from NT$452.30 billion a year earlier. Earnings per share came in at NT$29.43, up from NT$27.25 in the second quarter and NT$17.44 in the third quarter of 2025. Per ADR, EPS reached $4.60 against a $4.42 forecast, a 4% beat.

The consensus bar was cleared comfortably. Analysts had expected net profit of NT$746.3 billion, a 65% annual increase. TSMC delivered NT$763.06 billion, a 2.2% beat. This marks the sixth consecutive quarter of record net profit and the eleventh straight quarter of profit growth.

Returns on capital stayed exceptional. Return on equity reached 45.5% in the third quarter, compared with 45.9% in the second quarter and 37.8% a year earlier. A 45.5% ROE at a company with a $2.1 trillion market cap and a balance sheet funding $60 billion-plus of annual capex is rare across global equities.

Cash generation backed the earnings. Operating cash flow reached NT$920 billion in the quarter, against capital spending of NT$443 billion, or $13.8 billion, and dividends paid of NT$156 billion. TSMC funded its entire capex program and its dividend from operating cash with room to spare.

The sequential profit gain looks smaller than it is. Second-quarter profit included NT$63.20 billion of disposal and mark-to-market gains on Vanguard International Semiconductor shares after TSMC sold an 8.1% stake in May. Non-operating items fell to NT$34.59 billion in the third quarter from NT$95.83 billion in the second. Strip out that one-time gain, and core operating profit growth quarter over quarter was much stronger than the 8.0% headline.

Net profit margin reflects the same effect. It came in at 51.1%, down from 55.6% in the second quarter but up from 45.7% a year earlier. The quarter-over-quarter decline is almost entirely the absence of the Vanguard gain, not a deterioration in operations.

Q4 Guide: $52.3 Billion to $54.3 Billion and 58% Annual Growth

The forward guide was the strongest part of the report. For the fourth quarter, TSMC expects revenue between $52.3 billion and $54.3 billion, a 14% sequential increase and a 58% year-over-year jump at the midpoint of $53.3 billion. The guide came in above analyst estimates.

That midpoint implies an acceleration. Revenue grew 41.2% year over year in dollar terms in the third quarter. A 58% increase in the fourth quarter would mark a step up of 17 percentage points in annual growth, in a business already generating more than $46 billion a quarter. Very few companies anywhere accelerate at that scale.

The full-year picture moved higher too. TSMC lifted its 2026 revenue growth target to 44% and reiterated its $60 billion to $64 billion capex budget. Annual revenue growth of 44% for a company of TSMC’s size translates into more than $55 billion of incremental sales in one year.

Margin guidance is the softer part. TSMC expects fourth-quarter gross margin between 65% and 67%, with a 66% midpoint, and operating margin between 56.5% and 58.5%. The guidance assumes an exchange rate of 31.8 New Taiwan dollars per US dollar. The 66% gross margin midpoint is 40 basis points below the third quarter’s 66.4%.

Management explained the pressure directly. The fourth-quarter gross margin decline comes primarily from continued dilution from the steep ramp-up of 2-nanometer technology, as well as dilution from overseas fabs. That is a planned margin cost of moving the most advanced node into volume production while building capacity in Arizona, Japan and Germany.

CEO C.C. Wei framed the demand outlook in unambiguous terms. Demand for leading-edge technologies remains extremely strong, he said, with rising AI demand fueled by the adoption of agentic AI as the market moves from chatbots to AI assistants. That’s a shift in the type of AI workload, from simple question-answering to multi-step autonomous tasks that consume far more compute per user.

The test for the guide is simple. A fourth-quarter gross margin print below 65%, the bottom of the range, would be the first sign that margin pressure is running ahead of TSMC’s own plan. Anything inside the 65%-67% range confirms that the 2nm dilution is controlled.

Margin Math: 66.4% Gross, 58.7% Operating and the 2nm Dilution

Margins are the one place where the report showed strain, and the market fixated on it. Gross margin came in at 66.4%, inside the 65% to 67% guidance range but down 130 basis points from 67.7% in the second quarter. A year earlier, gross margin stood at 59.5%, so the annual comparison still shows a 6.9-percentage-point gain.

Operating margin held up better. It reached 58.7%, above the 56% to 58% guidance range, though down 1.6 percentage points from 60.3% in the second quarter. A year earlier, operating margin was 50.6%, giving an 8.1-point annual improvement. Operating expenses rose 17.6% sequentially to NT$116.43 billion, in line with revenue growth.

The 2nm ramp is the main cause. Compared with the second quarter, gross margin decreased primarily because of margin dilution from the initial ramp-up of 2-nanometer technology. New nodes always start with lower yields and higher depreciation per wafer, then improve as production scales. The 2nm process already accounted for 8% of total wafer revenue in the third quarter, a fast ramp for a node in its first quarters of volume.

Overseas fabs add a second, longer drag. Management said overseas fabs will continue to weigh on profitability over the next few years. Factories in Arizona, Kumamoto and Dresden carry higher labor, construction and operating costs than TSMC’s Taiwan base. Those costs are a strategic price for geographic diversification demanded by customers and governments.

The historical context reduces the concern. Back in January, TSMC guided first-quarter 2026 gross margin to 63%-65% and said a long-term gross margin of 56% and higher through the cycle was achievable. Since then, gross margin has run at 66.4% to 67.7%, well above that long-term floor. The current dilution comes from a much higher starting point than the company planned for.

The 3nm transition offers a precedent. TSMC said in January that N3 gross margin would cross over to the corporate average sometime in 2026. The same path is likely for 2nm: dilutive during the first year of ramp, accretive once yields mature. As 2nm grows from 8% of wafer revenue toward 20% or more, the margin drag should peak and then reverse.

For the stock, margins matter more than revenue right now. Investors already expected strong revenue from AI demand. What they’re weighing is whether the cost of serving that demand, through new nodes and overseas capacity, will cap profitability. A 66% gross margin with 58% annual revenue growth is an extremely profitable business, but it is not an expanding-margin story in the near term.

Capex: $60 Billion to $64 Billion Now, More Through 2028

Capital spending is the second number driving the selloff. TSMC reiterated its 2026 capital budget of $60 billion to $64 billion, citing continued strong multi-year demand from customers, including the emerging agentic AI market. CFO Wendell Huang added that capex from 2026 to 2028 will be significantly higher than the past three years.

The scale is unprecedented for the company. TSMC spent $40.54 billion on capex in 2025, well above the $29 billion to $35 billion annual range of 2021 to 2024. The 2026 budget represents a 48% to 58% increase on 2025. Third-quarter capex alone reached $13.8 billion.

Spending guidance for 2027 points even higher. Pre-earnings expectations already pointed to 2027 capex of $75 billion to $80 billion, along with gross margin close to 70%. Management’s comment that 2026-2028 spending will be significantly higher than the prior three years supports that trajectory.

The market’s concern is return timing. In a world of 5% Treasury yields and a Federal Reserve debating more hikes, investors discount future cash flows at a higher rate. Capex spent today generates revenue over five to ten years. When the discount rate rises, the present value of that future revenue falls, even if the long-term demand forecast is unchanged.

TSMC funds its capex from operating cash flow, not debt. Debt-to-equity stands at 0.17, long-term debt-to-equity at 0.14, the quick ratio at 2.25 and the current ratio at 2.46. Cash per share sits at $21.29. Operating cash flow of NT$920 billion in the third quarter more than doubled capex of NT$443 billion.

That distinction matters this week. The AI selloff has hit hardest at companies financing capacity with high-yield debt. CoreWeave, which carries $35 billion in debt and bonds yielding just under 13%, fell 15.46% Wednesday and another 6.89% Thursday morning. TSMC’s capex is self-funded, which makes it structurally different from the neocloud buildout, even if it trades in the same sector basket.

The capex outlook also signals confidence. A company that expects demand to slow doesn’t raise multi-year spending guidance. TSMC builds capacity based on customer commitments, often years in advance. Reiterating $60-$64 billion for 2026 and pointing higher for 2027 and 2028 tells investors that its largest customers, including Nvidia, Apple, AMD and Broadcom, are still placing orders that require more capacity.

Why the Stock Fell: Rates, Chips and the AI Credit Scare

The selloff in TSM is a sector story with a macro trigger. The September Producer Price Index rose 1.3% for the month and 6.3% over 12 months, the largest monthly gain since March 2022. That followed Wednesday’s 3.7% CPI print. The two reports pushed October Fed hike odds from 22.1% before CPI to as high as 49%.

The semiconductor sector took the hit. The Philadelphia semiconductor index fell 4.3% Wednesday, and chip stocks lost ground for an eighth straight session Thursday. On Wednesday, Advanced Micro Devices fell 5.7%, Broadcom 3.1% and Nvidia 3.2%. Thursday premarket, Nvidia lost 2%, AMD 4%, Micron 4% and Sandisk 6%.

Asia led the overnight rout. South Korea’s Kospi fell 7.57%, with SK Hynix down 11% and Samsung Electronics down 9% in Seoul. Japan’s Nikkei dropped 5%. Taiwan’s weighted index fell 3.41%. The memory-chip selloff spread directly into TSMC’s home market before the US open.

AI credit stress amplified everything. CoreWeave traded at $61.25 at the open, down 21% in two sessions, as rising yields on its own bonds raised concerns about its debt load. Dell fell 11.27% Wednesday. Investors began questioning not whether AI demand exists, but who pays for the infrastructure and at what rate. TSMC sits at the base of that supply chain, so any doubt about its customers’ customers flows back to its valuation.

Interest rates hit valuation multiples directly. TSM traded at a trailing P/E of 31.15 and has a beta of 1.24. Higher-beta, higher-multiple stocks fall hardest when the discount rate rises. The 10-year Treasury yield fell 14 basis points to 5.05% Thursday, but that move reflected fear of a growth slowdown, not easier policy, and fear does not support growth-stock multiples.

Positioning made the reaction worse. TSMC’s Taipei-listed shares were up 63% for the year before the report, trailing the Taiwan market’s 69% gain but still reflecting heavy institutional ownership. Going into the results, the risk was that meeting forecasts might not be enough to lift the stock. With profit largely priced in, the report gave holders a liquid event to cut exposure.

The disconnect is the opportunity. Every reason the stock fell Thursday came from outside TSMC: inflation data, Fed odds, Korean memory stocks and US neocloud credit. Every number TSMC itself reported came in at or above expectations.

Valuation: 31x Trailing, 18x Forward and a Discounted Growth Rate

Valuation looks expensive on trailing earnings and cheap on forward ones. At $413.50, TSM trades at 31.15 times trailing earnings per share of $13.29. Before the report, the trailing multiple stood at 31.04x against a five-year median of 22.63x. On that measure, the stock still carries a 37% premium to its own history.

Forward earnings tell a different story. Earnings per share for next year are projected at $22.53, with expected growth of 32.57%. At $413.50, TSM trades at 18.4 times next year’s estimate. The stock had been trading at 19.48x forward earnings, close to its 19.32x average, and well below the near-24x peak it reached in mid-2026.

That compression is significant. From a forward multiple near 24x in mid-2026 to 18.4x today, TSM has de-rated by 23% while its earnings outlook has improved. The quarter’s 58% revenue growth guide for the fourth quarter and the lifted 44% full-year target both point to upward revisions to forward estimates, which would compress the forward multiple further at the current price.

Growth-adjusted, the stock looks cheaper still. Estimated EPS growth over the next five years stands at 39.92% annually. A forward P/E of 18.4x against a 40% long-term growth rate gives a PEG ratio below 0.5, a level usually associated with value stocks rather than the world’s most important semiconductor manufacturer.

The consensus target sits well above the current price. The average 12-month price target stands at $579.67, with a high of $1,000 and a low of $440. At $413.50, the stock trades 29% below the average target and 6% below the lowest target on the Street.

Profitability supports the multiple. TSMC generates a 45.5% return on equity, a 31.23% return on invested capital and a 26.90% return on assets. Companies with ROIC above 30% and revenue growth above 40% historically command premium multiples. At 18.4x forward earnings, TSM trades at a multiple closer to a mature industrial than a high-growth monopoly.

Dividends add a small cushion. TSM pays a forward dividend yield of 0.85%, with the next ex-dividend date on December 10, 2026. The yield is modest, but dividends paid in the third quarter reached NT$156 billion, showing TSMC can return cash while funding record capex.

Technical Picture: $407 Low, $430 Gap and the $487 High

The chart has turned sharply lower in two weeks. TSM closed at $472.78 on October 2, near its 52-week high of $487.47. By Wednesday it closed at $430.00, and Thursday’s open at $415.17 created a gap down of $14.83 that the stock hasn’t filled. The intraday low at $407.15 marks the first trade below $410 since mid-September.

The September base is the next reference. On September 15, TSM closed at $413.75 after trading between $412.55 and $421.94. The stock rallied from that zone to $472.78 in under three weeks. Thursday’s decline has erased that entire rally and returned the stock to its mid-September starting point.

Support levels stack below. The first is Thursday’s intraday low at $407.15. Below that, $400 serves as the psychological level and a round-number options strike. The next meaningful support sits near $380, where the stock consolidated in the summer, and the 52-week low at $266.82 lies far below any realistic near-term test.

Resistance starts at the gap. The open at $415.17 and the morning high at $422.98 form the first ceiling. Wednesday’s close at $430.00 is the gap-fill target, 4% above current levels. Above that, $440 marks the lowest analyst target and a prior consolidation zone, followed by $450.61-$456.94 from late September and the October 2 close at $472.78.

Volume signals institutional selling. Nearly 9.75 million shares traded in the first hour, close to the stock’s 11.13 million average for an entire day. Heavy volume on a gap down after an earnings beat usually indicates repositioning by large funds rather than retail panic.

The options market had prepared for this. The implied earnings move stood at plus or minus 4.3% to 4.9%, and TSM fell 3.8% after the last earnings report. Thursday’s 3.84% decline sits inside the implied range, which suggests the move, while painful, hasn’t broken the market’s expectations.

The key level for the session is $407. A daily close above $415 would signal that buyers absorbed the gap-down supply and set up a gap-fill attempt toward $430. A close below $407 would open a path to $400 and likely $380 within days, especially if the semiconductor index posts a ninth straight loss.

AI Demand: HPC at 68% and the Agentic Shift

The demand mix tells you where TSMC’s growth comes from. High-performance computing made up 68% of third-quarter revenue, driven by AI accelerators and data center processors. Advanced nodes, 7nm and below, accounted for 79% of wafer sales. The 2nm process reached 8% of wafer revenue in its early ramp.

That concentration is both strength and risk. TSMC builds the chips that power the AI buildout for Nvidia, AMD, Broadcom, Apple and the hyperscalers designing their own accelerators. Every dollar of AI infrastructure spending eventually requires wafers from TSMC’s leading-edge fabs. But the same concentration links TSMC directly to the health of AI capital spending.

Management sees demand broadening, not peaking. CEO C.C. Wei described increasing AI demand fueled by the rising adoption of agentic AI as the industry transitions from chatbots to AI assistants. Agentic workloads run multiple steps, call tools and maintain context across longer tasks, which multiplies compute per user compared with simple chatbot queries.

The fourth-quarter guide confirms near-term strength. A 14% sequential revenue increase at the midpoint means customers are ordering more wafers in the final quarter of 2026 than in any prior quarter. Those orders are placed months in advance, which means TSMC has visibility into demand that the equity market’s current pessimism doesn’t reflect.

The AI financing question remains the risk. TSMC’s direct customers, Nvidia, AMD and Broadcom, are well capitalized. But their customers include neoclouds like CoreWeave, which rely on debt to buy GPUs. If credit conditions tighten enough to slow neocloud purchases, chip designers would see weaker orders, and TSMC would eventually feel that through its order book.

The timeline cuts in TSMC’s favor. Hyperscalers including Microsoft, Alphabet, Amazon and Meta fund AI capex from operating cash flow, and they represent the largest share of end demand. Apple, another top customer, crossed $5 trillion in market cap again Thursday and funds its AI work internally. The debt-funded portion of AI demand is significant but not dominant.

TSMC’s capacity plan is the clearest demand indicator. A company with direct order visibility from the world’s largest technology buyers reiterated a $60-$64 billion capex budget and signaled higher spending through 2028. That decision reflects multi-year commitments, not quarter-to-quarter sentiment.

Competitive Position: The Leading-Edge Monopoly Holds

TSMC’s competitive lead widened again this quarter. The company is ramping 2-nanometer production at volume while competitors remain behind. Samsung Electronics projected quarterly operating profit above 100 trillion won on AI memory demand, but its foundry business continues to trail TSMC at the leading edge. Intel’s foundry ambitions remain years from matching TSMC’s volume and yield on comparable nodes.

Customer concentration reflects that lead. The world’s most advanced AI chips, including Nvidia’s GPUs, AMD’s accelerators and Broadcom’s custom silicon for hyperscalers, run on TSMC processes. Switching foundries for a leading-edge design takes years and billions of dollars, which gives TSMC durable pricing power.

Pricing power shows up in the margins. Gross margin of 66.4% for a manufacturing company is extraordinary. It reflects TSMC’s ability to charge premium prices for capacity that no competitor can supply at comparable yield. Even with 2nm dilution and overseas fab costs, gross margin has held above 65% for multiple quarters.

Geographic diversification is a competitive tool too. Overseas fabs in Arizona, Japan and Germany carry higher costs, but they also lock in customers and governments that require supply-chain resilience. US customers prioritizing domestic production have fewer alternatives for leading-edge capacity, and TSMC’s Arizona fabs capture that demand.

New entrants face steep barriers. AI companies are exploring custom chips, and reports this week linked Elon Musk’s ventures to new chip manufacturing efforts. TSMC’s CEO reportedly said the company would be open to working on such projects but would need to run the operations. Even companies with deep pockets depend on TSMC’s process technology and manufacturing expertise to produce leading-edge chips.

The memory selloff doesn’t change TSMC’s position. Memory makers like SK Hynix and Samsung compete in a commoditized, cyclical market where prices swing sharply with supply. TSMC’s logic foundry business operates on long-term contracts with stable pricing. Thursday’s selling treated them as one trade, but their economics are fundamentally different.

The sector ETF exposure creates the opportunity. TSM is a top holding in semiconductor ETFs including SMH and SOXX. When investors sell those ETFs to cut chip exposure, TSM gets sold mechanically alongside more leveraged names. That flow-driven selling doesn’t discriminate between companies with 66% gross margins and self-funded capex and those with junk-rated debt.

Peer Comparison: Where TSM Sits in the Chip Selloff

Thursday’s moves across semiconductors show TSM falling in line with the group, not apart from it. Nvidia led premarket declines at 2%, AMD fell 4%, Micron 4% and Sandisk 6% after a 5% drop Wednesday. SK Hynix’s US-listed shares sank 6.74%. TSM’s 3.84% decline sits in the middle of that range.

The memory names fell harder for a reason. Memory pricing depends on near-term supply and demand, and the AI-driven memory rally rested on assumptions about continuous hyperscaler purchases through 2027. When credit concerns hit AI buyers, memory prices are the first to reprice. Sandisk, the S&P 500’s best performer in 2026, has lost 11% in two days.

Nvidia’s smaller decline is telling. Nvidia fell 3.2% Wednesday and 2% in premarket Thursday, a gentler move than TSM’s. Nvidia carries the direct relationship with AI buyers and has pricing leverage over its customers. TSM, as Nvidia’s manufacturer, sits one step further back in the supply chain and absorbs both the AI cycle risk and its own capex risk.

AMD and Broadcom show the cost-of-capital effect. AMD fell 5.7% Wednesday on heavy institutional profit-taking and multiple compression across high-beta tech, and Broadcom dropped 3.1% as rising borrowing costs weighed on data center buildouts. Both are TSMC customers. Their declines reflect the same multiple compression hitting TSM.

Apple stood apart. Apple gained in premarket after crossing $5 trillion in market cap again. Apple is TSMC’s largest customer by many measures, and its AI investments are funded from operating cash. Apple’s strength while the chip group sold off shows investors distinguishing between self-funded and debt-funded AI exposure, and that distinction ultimately favors TSMC as well.

Taiwan versus Korea is the starker comparison. TSMC fell 2% in Taipei while the Kospi plunged 7.57%, and SK Hynix and Samsung dropped 11% and 9%. Taiwanese investors treated TSMC’s results as a fundamental anchor even during the regional rout. US investors, selling ETFs and sector baskets, pushed the ADR down harder.

That gap often closes. When ADRs fall more than their home listings on sector-wide selling, the spread tends to narrow as arbitrage flows and fundamental buyers step in. TSM’s ADR premium to its Taipei shares compressed Thursday, which creates a relative-value case for the ADR once US selling eases.

Scenarios: $380 Downside, $472 Upside Into Year-End

The base case is a recovery toward the gap. If the semiconductor index stabilizes after eight losing sessions, the 10-year Treasury yield holds near 5.05% and the Fed meeting on October 27-28 passes without a surprise, TSM fills Thursday’s gap toward $430 within two to three weeks. Upward revisions to fourth-quarter and 2027 estimates, driven by the $54.3 billion high end of guidance and the 44% revenue growth target, support the move. In this scenario, TSM trades between $415 and $440 into November.

The bullish case needs the AI credit scare to fade. If CoreWeave’s bonds stabilize, Fed Chair Kevin Warsh signals patience on Friday and chip stocks rebound sharply, TSM retests $450-$457 and then the October 2 close at $472.78, a 14% gain from current levels. A return to the 52-week high at $487.47 would require evidence that fourth-quarter margins land in the upper half of the 65%-67% guide, along with a broader rotation back into AI hardware.

The bearish case requires the selloff to deepen. If the Fed hikes on October 28, US yields climb back above 5.20% and AI credit stress spreads beyond CoreWeave, TSM breaks $407 and $400, targeting $380, an 8% decline from current levels. A failure to fill the gap combined with a ninth consecutive loss in the semiconductor index would be the first warning.

The probabilities lean toward the base case. TSMC’s fundamentals improved this quarter on revenue, profit, guidance and full-year growth. The stock’s decline came from macro and sector factors that have historically reversed within weeks once credit markets stabilize. At 18.4x forward earnings and 29% below the average analyst target, valuation offers support near $400.

Catalysts over the next two weeks are clear. Warsh speaks Friday. US semiconductor earnings, including chip-equipment makers and AI designers, begin in late October. The Fed decides on October 28. TSMC reports November revenue in early December, which will provide the first hard data on whether the fourth-quarter guide is tracking.

Verdict: Bullish on the Dip, $430 First Target

TSM fell 3.84% to $413.50 Thursday on a quarter that beat on every major metric. Revenue reached $46.72 billion, up 41.2% year over year and above the top of guidance. Net income rose 68.7% to NT$763.06 billion, the sixth straight record. Operating margin of 58.7% beat the top of guidance, return on equity hit 45.5%, and fourth-quarter revenue guidance of $52.3 billion to $54.3 billion implies 58% annual growth at the midpoint. Full-year 2026 revenue growth rose to 44%.

The selloff came from outside the company. A 6.3% US producer price print, Fed hike odds jumping toward 49%, an eighth straight loss in chip stocks, a 7.57% plunge in the Kospi and a credit scare at CoreWeave pushed investors to cut semiconductor exposure across the board. Gross margin dilution from the 2nm ramp, down 130 basis points to 66.4% with a 66% midpoint guide for the fourth quarter, and a $60-$64 billion capex budget gave sellers a reason to trim. Neither undermines the demand story.

The stock is now cheaper with stronger fundamentals. At $413.50, TSM trades at 18.4 times next year’s earnings, down from a forward multiple near 24x in mid-2026, with a $2.145 trillion market cap, 29% below the $579.67 average analyst target and below even the lowest $440 target. Self-funded capex, a 0.17 debt-to-equity ratio and NT$920 billion in quarterly operating cash flow separate it from the leveraged AI names dragging the sector lower.

The forecast is bullish over a one-to-three-month horizon. Expect TSM to hold the $400-$407 zone and fill the gap toward $430 as sector selling eases, with a break above $430 targeting $450-$457 and the $472.78 October 2 close by year-end. A daily close below $400 would delay the recovery and open a test of $380, but at 18.4x forward earnings for a business guiding 58% growth, the risk-reward at $413.50 tilts clearly toward buyers.

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