AI-Driven Demand Fuels TSM's Growth: Will It Meet 2026 Revenue Target?

Core Insights - Taiwan Semiconductor Manufacturing Company (TSMC) is experiencing significant growth due to the rising global demand for artificial intelligence (AI) chips, with revenues increasing by 35.9% year over year to $122.42 billion in 2025 and earnings per share (EPS) rising by 51.3% to $10.65 [1][10] Group 1: Revenue Growth and Forecast - The robust growth in TSMC's revenue is primarily attributed to increased orders for 3nm and 5nm chips, which are essential for AI servers and high-performance computing applications [2][10] - TSMC forecasts approximately 30% revenue growth in 2026, indicating a continuation of the upward trend in demand for AI-related chips [2] Group 2: Manufacturing Capabilities and Expansion - TSMC's advanced fabrication facilities position the company well to meet the rising demand for AI and advanced computing chips [3] - To address the growing demand, TSMC is investing $165 billion in the United States to build five new state-of-the-art fabrication facilities and two advanced packaging facilities in Arizona, while also expanding facilities in Germany, Japan, and Taiwan [4][5] Group 3: Competitive Landscape - Competitors such as Intel Corporation and GlobalFoundries Inc. are also expanding their presence in AI chip manufacturing, with Intel focusing on its 18A process for advanced chips and GlobalFoundries targeting mature nodes [6][7] Group 4: Stock Performance and Valuation - TSMC's shares have surged approximately 56.5% over the past year, outperforming the Zacks Computer and Technology sector's gain of 24.7% [8] - The company trades at a forward price-to-earnings ratio of 26.29, which is lower than the sector's average of 27.42 [11] Group 5: Earnings Estimates - The Zacks Consensus Estimate for TSMC's earnings implies a year-over-year increase of 20.8% and 23.3% for 2026 and 2027, respectively, although estimates have been revised downward in the past week [14]