TSMC Stock Price Forecast - TSM Pushes Toward $389 High As AI Demand Redraws The Chip Map

TSMC Stock (NYSE:TSM): AI Foundry At Record Territory Around $387

Price Action, Valuation And Trading Range For TSMC Stock (NYSE:TSM)

TSMC Stock (NYSE:TSM) is trading around $387 after a 4.6% daily jump from a previous close of $370.04, with the session range at $376.05–$389.18 and the 52-week band at $134.25–$389.18. That puts the name effectively at its all-time high with a market capitalization near $1.64 trillion, a trailing P/E of 36.75 and a dividend yield of 0.87%, while price-to-book sits around 1.77 on TWD 5.46 trillion of equity and 25.93 billion shares outstanding. On a forward basis, the multiple compresses into the mid-20s once the projected earnings ramp is built in, which means the market is already paying a premium but still below what you would expect for a business growing revenue in the high-20s and earnings above 30%. For live pricing and intraday context, use the real-time view:
TSMC Stock (NYSE:TSM) Real-Time Chart

Earnings Engine: Trillion-TWD Revenue, 48% Net Margin And EPS Acceleration

The core story is the income statement. For Dec 2025, TSMC delivered TWD 1.05 trillion in revenue, up 20.45% year on year, while net income reached TWD 505.74 billion, a 40.57% jump. That pushed net margin to 48.35%, an expansion of 16.7 percentage points, signaling a mix shift toward higher-value wafers, excellent factory utilization and tight cost discipline. EPS climbed to TWD 19.50, up 34.95%, comfortably outpacing sales growth and demonstrating clear operating leverage. At the quarterly level, revenue around $33.7 billion with roughly 20.5% annual growth, combined with EPS growth in the mid-30s, creates an earnings base that can justify a forward P/E in the mid-20s without stretching. Consensus now builds in revenue growth around 29% for 2026 and 25% for 2027, with earnings expected to rise roughly 33% then 24%, implying that today’s print is not a one-off spike but the start of an extended AI capex cycle reflected directly in the bottom line.

Margin Structure: 62–65% Gross Margin Even With Overseas Fab Dilution

Margins are where TSMC Stock (NYSE:TSM) separates itself. Gross margin in Q4 2025 landed around 62.3%, up roughly 330 basis points year on year. Management then guided Q1 2026 gross margin in the 63–65% band, despite explicitly flagging that overseas fabs in the US, Japan and Europe dilute group gross margin by 2 percentage points initially, and potentially 3–4 points as those fabs move up the utilization curve. Even with that drag, the company still expects to sit in the low-to-mid-60s, which is far above the roughly 49% margin profile a decade ago. That’s the result of three forces: advanced-node wafers priced at a significant premium, extremely high utilization on cutting-edge lines, and strong internal efficiency and automation that offset higher labor and construction costs offshore. The message is simple: even while absorbing more expensive geographies, the business is expanding profitability.

Balance Sheet And Returns: TWD 3.07T Cash, Low Leverage, High ROA And ROC

On the balance sheet, TSMC is running with TWD 3.07 trillion in cash and short-term investments, up 26.71% year on year, against TWD 7.93 trillion in total assets and only TWD 2.47 trillion in liabilities, which rose just 2.48%. That leaves TWD 5.46 trillion in equity and keeps financial risk low despite an aggressive capex program. Return on assets sits at 18.48% and return on capital at 22.56%, unusually high for a capital-intensive manufacturer. Those levels are consistent with a business that converts each incremental dollar of capex into high-margin, high-demand output. With a price-to-book of 1.77, the equity market is not stretching valuation versus those return metrics; it is effectively paying a reasonable multiple for double-digit ROA and ROIC in a strategic industry.

Cash Flow Capacity: Strong Operations, Heavy Capex, Positive Net Cash Change

Cash generation supports the equity story. For Dec 2025, TSMC recorded TWD 505.74 billion in net income and TWD 725.51 billion in cash from operations, up 16.98%. Investment outflows reached TWD –365.96 billion, reflecting sustained capex into advanced nodes and new fabs and showing –17.33% change versus the prior year, while financing cash flow was TWD –107.69 billion, with a –6.90% shift, capturing dividends and debt management. The result was a net change in cash of TWD 297.10 billion, up 23.36%, which means the company is funding a massive capex cycle and still adding to the cash pile. Free cash flow around TWD 219.78 billion, down 7.79%, is the one pressure point: management is deliberately trading near-term free cash flow margin for long-term AI capacity. As long as revenue and EPS continue to scale as guided, that decision is rational and value-accretive.

AI Cycle: 70% Foundry Share And Hyperscaler Demand As A Structural Tailwind

TSMC controls roughly 70% of the global pure-play foundry market, positioning it at the center of the AI infrastructure buildout. Over the last five years, the stock has climbed over 170%, driven by demand from hyperscale clients rolling out AI data centers and high-performance computing clusters. The forward-looking commentary points to long-term revenue growth around 25% CAGR, anchored in orders from names like Nvidia, Apple, AMD, Broadcom and leading cloud platforms that are all committing trillions of dollars to AI infrastructure over the coming decade. The key difference versus the smartphone cycle is that AI demand is not tied to consumer replacement behavior; it is linked to capacity build at large compute operators. That structurally reduces cyclicality and supports a higher, more stable margin and growth profile for TSMC Stock (NYSE:TSM) than in the old handset era.

Overseas Fabs, Capex Above $50B And Long-Term Margin Trade-Off

Management is planning to spend upwards of $56 billion across the current investment cycle, with a substantial portion going into manufacturing capacity in the United States, Japan and Europe. These fabs carry higher labor and construction costs than Taiwan plants, which is why the company openly models margin dilution of 2–4 percentage points as those facilities ramp. At the same time, these projects unlock government incentives, de-risk the supply chain from a geopolitical standpoint and cement TSMC as the default advanced-node provider in all major regions. Given current gross margins north of 60%, accepting a modest structural drag in exchange for geopolitical diversification and customer stickiness is a rational trade. The current 62–65% margin guide already incorporates that, so upside exists if cost curves in overseas fabs come down faster than expected.

Geographic Concentration And Geopolitical Risk Around Taiwan

Roughly 75% of TSMC’s revenue currently comes from North American customers, while a large portion of physical manufacturing remains anchored in Taiwan. That combination creates two distinct risks: demand concentration and geopolitical exposure. A slowdown in US AI and cloud capex would hit top line growth quickly, especially if AI budgets normalize after an initial land-grab phase. More structurally, any escalation around Taiwan would be a direct hit to the entire semiconductor ecosystem. Senior officials in major economies have already described a potential blockade as an “economic apocalypse” scenario because advanced chips are now systemic for everything from AI to vehicles to industrial automation. TSMC’s diversification of production to the US, Germany and Japan is a necessary hedge, but it does not eliminate the underlying geopolitical overhang. The market knows that and still awards the stock a 36.75 P/E, which means these risks are recognized but not viewed as imminent.

Competitive Landscape: Intel, GlobalFoundries And The Advanced-Node Gap

On the competitive side, Intel is pushing its foundry strategy with nodes such as 18A (around 1.8nm) and positioning to capture a slice of AI workloads, while GlobalFoundries is focusing on mature nodes for edge and embedded AI. Both are investing aggressively and will attract some volumes from customers seeking dual-sourcing and political diversification. However, the core advantage of TSMC remains the breadth and maturity of its advanced nodes, coupled with the scale of its ecosystem. The company is already industrializing 3nm and 5nm, and it is preparing 2nm and beyond, all while maintaining gross margins above 60% and ROA near 18.5%. That combination of yield, volume and profitability is difficult to match. Competitors are relevant, but at this stage they look more like supplementary options for customers rather than credible replacements for TSMC at the leading edge.

Ownership, Insider Behavior And Stock Profile Context For TSMC Stock (NYSE:TSM)

Understanding how capital allocators and insiders behave around TSMC Stock (NYSE:TSM) is critical when valuation stretches. Detailed ownership structure, institutional exposure and insider behavior can be followed here:
TSMC Stock Profile
For direct insight into buying and selling activity by key officers and directors, use the dedicated transactions feed:
TSMC Insider Transactions
Given the company’s 29% dividend increase in 2025 versus 2024, combined with a 27% rise in cash and marketable securities, capital allocation is being managed from a position of strength. Any sustained insider accumulation near current levels would reinforce the case that internal decision-makers see the recent rally as justified rather than overheated.

Valuation, Risk-Reward Profile And Verdict On TSMC Stock (NYSE:TSM)

Valuation is rich but not extreme for what the company is delivering. A trailing P/E of 36.75 and forward multiple around 25 sit above sector averages but are backed by 20–25% revenue growth, 30%+ earnings growth, gross margins in the low-to-mid-60s, and ROA above 18% with ROIC in the low-20s. Some models place a fair-value range roughly around $310–$420 depending on assumed long-term growth and discount rate; with the stock trading near $387, it sits toward the upper half of that band but not beyond it. You are paying up for a dominant position in AI manufacturing, a balance sheet with TWD 3.07 trillion in cash, and a margin structure most industrial businesses can’t get close to. The main negatives are clear: geopolitical exposure around Taiwan, cyclicality in global semiconductor demand, concentration in North American clients and the risk that AI capex normalizes faster than expected after the current boom. Weighing those against the growth, profitability and strategic positioning, the stance here is Buy on TSMC Stock (NYSE:TSM) at current levels, with the caveat that short-term drawdowns can be sharp if AI sentiment or macro conditions wobble. Over an intermediate horizon, the combination of 70% foundry share, sustained 60%+ gross margins, and projected 25%+ long-term revenue CAGR provides a solid basis for further upside beyond the current $387 region.

That's TradingNEWS