Buy the Surge in Taiwan Semiconductor Stock as Q3 Results Approach?

Core Insights - Taiwan Semiconductor (TSM) is experiencing record growth driven by unprecedented demand for next-generation AI chips, with shares up nearly 400% over the last three years and 50% in 2025 [1][2]. Company Performance - TSM's Q3 sales are expected to surge 34% year-over-year to a record $31.5 billion, while EPS is projected to spike 33% to $2.59 [5]. - The company has surpassed sales estimates for nine consecutive quarters and exceeded earnings expectations for 19 straight quarters, with an average sales surprise of 1.58% and earnings surprise of 5.96% over the last four quarters [6]. Client Relationships - Major clients utilizing TSM's advanced nodes include Apple, Nvidia, AMD, Broadcom, Qualcomm, and Marvell Technology, highlighting TSM's critical role in the AI chip manufacturing ecosystem [4]. Valuation Metrics - TSM shares currently trade at 31X forward earnings, which is not significantly above the S&P 500's 25X, and is comparable to Apple and Marvell Technology's valuations [8]. - In terms of price-to-forward-sales, TSM trades at a premium of 14X, only below Nvidia's 27X, while other high-growth tech clients are above the S&P 500's forward P/S ratio of 5X [9]. Future Outlook - TSM is projected to post record top and bottom line peaks in fiscal 2025 and FY26, making the upcoming Q3 results and guidance critical for maintaining investor confidence [11].