TSM Soars 69% in a Year: Should Investors Still Buy the Stock?

Core Insights - Taiwan Semiconductor Manufacturing Company (TSMC) has achieved a 67.8% stock gain over the past year, driven by the AI boom and demand for advanced chips from major clients like NVIDIA, Broadcom, and Marvell Technology [2][4][10] - TSMC's performance has outpaced the Zacks Computer and Technology sector, which gained 27.9% in the same period, highlighting investor confidence in TSMC's long-term prospects [3][4] Financial Performance - TSMC's revenues for 2025 increased by 35.9% year over year to $122.42 billion, with earnings per share (EPS) rising 51.3% to $10.65, primarily due to strong demand for 3nm and 5nm chips [10][11] - The company anticipates approximately 30% revenue growth in 2026, with a Zacks Consensus Estimate of $158.2 billion, reflecting a year-over-year growth of 29.2% [11] Market Position and Strategy - TSMC is the leader in the global chip foundry market, benefiting from its scale and technology, which positions it as the preferred choice for companies involved in the AI boom [7][8] - The company plans to invest between $52 billion and $56 billion in capital expenditures in 2026 to meet the growing demand for AI chips, focusing on advanced manufacturing processes [9][10] Valuation - Despite its strong performance, TSMC's stock is considered reasonably priced, trading at a forward 12-month price-to-earnings (P/E) multiple of 24.1, lower than the sector average of 25.93 [12][15] - Compared to other semiconductor companies, TSMC has a lower P/E ratio than Broadcom and NVIDIA, but a higher valuation than Marvell Technology [15] Investment Recommendation - Given TSMC's strong fundamentals, exposure to AI demand, and attractive valuation, it is recommended to buy TSM stock at this time [16]