Taiwan Semiconductor Manufacturing Stock Jumps On Robust AI Chip Demand. Is It Time to Sell or Double Up on the Stock?

Core Insights - Taiwan Semiconductor Manufacturing (TSMC) reported strong quarterly results and an optimistic outlook, with shares increasing approximately 70% over the past year [2] Financial Performance - TSMC's Q4 revenue increased nearly 26% to $33.7 billion, with earnings per American depositary receipt (ADR) rising 40% to $3.14 from $2.24 a year ago [6] - The company's gross margin expanded by 330 basis points to 62.3%, while operating margins rose by 500 basis points to 54%, exceeding prior forecasts [7] Demand and Growth Drivers - There is an insatiable demand for AI chips, leading TSMC to project capital expenditures (capex) for this year between $52 billion and $56 billion, significantly above analyst expectations of nearly $41 billion for 2026 [3] - High-performance computing (HPC) accounted for 55% of TSMC's revenue in the quarter and 58% for the full year, with HPC revenue climbing 48% in 2025 [5] Market Position - TSMC maintains a near-monopoly in the production of advanced process nodes, with nodes of 7 nanometers and under accounting for 77% of its revenue, up from 74% a year ago [4] - The company's newest 3-nm technology contributed 28% to total wafer revenue, increasing from 26% a year ago [4]