Why Taiwan Semiconductor Manufacturing (TSMC) Stock Remains a Top Performer as Earnings Approach
TSMC Leads as a Top Performer Among Semiconductor Stocks
Taiwan Semiconductor Manufacturing Company (TSMC) stands as the world’s largest semiconductor foundry, producing chips for some of the biggest names in technology. In the past six months, TSMC’s stock price has soared by an impressive 93%, positioning it as one of the most attractive performance stocks in today’s market. With its highly anticipated third-quarter report on the horizon, investors are watching closely to analyze stocks like TSMC for potential high return investments.
Strong Earnings Driven by the AI Chip Boom
TSMC’s outstanding growth in recent years is largely fueled by the booming demand for artificial intelligence (AI) chips. The company commands an estimated 70% market share in contract chipmaking, according to TrendForce. TSMC manufactures crucial chips not only for industry leaders such as AMD, Nvidia, and Broadcom but also for Apple, Qualcomm, and MediaTek, enabling the company to tap into surging demand for AI-driven advancements in data centers, smartphones, and computers.
The company’s latest revenue figures are compelling: in September, TSMC reported a 31% year-over-year rise, bringing its third-quarter revenue to $32.5 billion—slightly surpassing its guidance and exceeding Wall Street’s expectations. Through the first nine months of the year, TSMC’s revenue has increased by over 36%, putting it ahead of its 2025 growth targets. Furthermore, profits are expected to climb as TSMC has reportedly raised prices on its advanced 3-nanometer (nm) chips by around 20%.
Smartphone Demand and Premium Chip Pricing Drive Growth
Chips based on the 3nm process remain in high demand, notably for use in smartphones. During the second quarter, TSMC attributed 27% of its revenue to smartphone sales, with 24% coming from its 3nm node. Apple’s use of TSMC’s 3nm chips for its latest iPhones—and robust smartphone demand—help position TSMC for continued growth, as both higher pricing and volumes drive investment returns.
Morgan Stanley projects that Apple could increase iPhone production to over 90 million units, up from earlier forecasts, enhancing TSMC’s outlook as Apple makes up about 20% of its revenues. The combination of increased device sales and higher chip prices may enable TSMC to provide stronger-than-expected Q4 guidance.
Future Growth: Moving Towards 2nm Technology
TSMC is set to advance its manufacturing process to 2nm in 2026, enabling even more powerful and energy-efficient chips. Early adopters are expected to include Apple, Nvidia, AMD, and MediaTek. Notably, these next-generation chips are seen to carry a significant price premium, with some analysts predicting a 10% to 20% markup over the 3nm node. While analysts currently expect TSMC’s earnings growth to moderate from 40% this year to 17% in 2026, these projections may be conservative as the company continues to innovate and benefit from AI-driven secular trends.
TSMC’s Valuation Remains Attractive
TSMC’s consistent ability to beat expectations makes it a strong pick for those interested in stocks and investing. At 25 times forward earnings, TSMC trades at a discount compared to the tech-heavy Nasdaq-100 index, which trades around 33 times earnings. A solid Q3 earnings report could drive the stock price—and valuation—even higher, suggesting that investors researching high return investment options should consider TSMC before its anticipated results are released.
--- This content is for informational purposes only and does not constitute financial advice.
