TSMC Price Forecast - TSM Stock Settles at $273 as AI-Driven Revenues Surge 44% and EPS Crushes Forecasts

TSMC Stock Outlook – Shares Hold $273 as AI Demand Fuels 44% Revenue Growth and EPS Beat

Taiwan Semiconductor Manufacturing Company (NYSE:TSM) ended the week at $273.36, slipping 1.19% in the session but maintaining a commanding $1.42 trillion market cap. The stock is up more than 55% year-to-date, making it one of the most powerful drivers of global semiconductor sentiment. The pullback comes after Q2 results blew past expectations, with revenue and earnings showing resilience despite FX headwinds and higher costs from overseas fabs.

Earnings Beat Anchored by 44% Revenue Growth

TSMC posted Q2 revenue of $30.1 billion, up 44% year-over-year and above Wall Street’s $29.6 billion consensus. Earnings per share came in at $2.47, beating estimates of $2.13. Gross margin stood at 58.6%, slightly below last year’s highs but still above peers such as Samsung Foundry and Intel. Operating margin hit 48.3%, underscoring efficiency despite rising depreciation and labor costs at its Arizona and Kumamoto facilities.

AI and Advanced Nodes Dominate Revenue Mix

TSMC’s leadership in advanced nodes is widening its moat. The N3/N5 process nodes accounted for 74% of wafer revenue, with N3 adoption ramping faster than expected. AI-related demand, particularly from hyperscalers like NVIDIA, AMD, and Apple, has been a growth engine, fueling record order backlogs. Management reaffirmed 30% full-year 2025 revenue growth, driven by a mix of N2 pre-production and early demand for the A16 node, scheduled for mass production in 2026.

Valuation Metrics Support Long-Term Upside

At current levels, TSM trades at 27x forward earnings and 8.6x sales, a premium to historical averages but justified by the growth trajectory. Free cash flow improved to $10.9 billion in Q2, while net cash reserves stand at $43 billion, giving TSM ample balance sheet strength to expand capacity. Analyst targets have been raised across the board, with Morgan Stanley calling for $291, and top-of-the-range outlooks from other brokerages projecting $325–$450 per share over the next 12 months.

Risks from FX, U.S. Export Controls, and Rising CapEx

Not everything is tailwind. Currency headwinds shaved nearly $1 billion off Q2 results, while CapEx remains at an elevated $32–36 billion annually, pressuring free cash flow. The U.S. export restrictions on advanced GPU shipments to China remain a material risk, as China represented 12% of Q2 revenue. TSMC’s global expansion—Arizona, Kumamoto, and potentially Germany—adds diversification but also margin dilution, with overseas gross margins running 5–7% lower than Taiwan fabs.

Dividend Growth and Capital Return

TSMC continues rewarding investors with steady dividend increases. The latest payout was $0.54 per ADR, giving a yield of 0.79%. While not high compared to traditional dividend names, consistent growth in payouts and strong free cash flow support expectations of further increases. With EPS expanding at a double-digit rate, payout ratios remain comfortably below 40%, leaving room for sustainable hikes.

Insider Activity and Institutional Flows

Institutional investors remain heavily exposed to TSMC. Major U.S. funds increased holdings after the Q2 report, while ETF inflows into semiconductor-focused funds like SOXX and SMH supported demand. Insider activity remains minimal given state ownership stakes, but foreign institutional participation is at record highs, underscoring confidence in the long-term AI infrastructure story.

Verdict: TSMC Stock is a Strong Buy on AI Leadership

The combination of 44% revenue growth, dominance in advanced nodes, and 30% guided FY25 expansion makes TSMC the most critical AI hardware enabler globally. Despite CapEx pressures and geopolitical risks, valuation multiples remain attractive given the company’s unique position as sole supplier for leading-edge nodes. With upside targets ranging from $291 to $450, the stock remains a Buy, with technical support at $260 and near-term resistance at $291. Investors betting on AI infrastructure growth cannot ignore TSM as the backbone of global chip supply.

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