Semiconductor stocks have surged recently, propelled by rising artificial intelligence demand and data-center investments. In 2025, Nvidia shares increased approximately 30%, while Intel stock climbed over 80%. Specialized chip suppliers also posted significant gains.
Taiwan Semiconductor Manufacturing Company, the world's largest contract chipmaker, is a key beneficiary. The company directly gains from accelerating AI adoption by major clients including Nvidia and Apple.
This sector-wide strength has boosted orders and revenues at leading foundries like TSMC. Last week, Taiwan Semiconductor announced a robust 20% year-over-year increase in fourth-quarter revenue, exceeding market forecasts and reinforcing its growth trajectory.
As momentum continues into 2026, investors are questioning whether TSMC stock still has further upside potential.
TSMC produces advanced logic chips for customers such as Nvidia, Apple, and AMD using leading-edge nodes like 3 nanometer and 5 nanometer, positioning it centrally in the global AI and data-center supply chain.
Heavy investment reinforces this position. TSMC is reportedly planning NT$450 billion to NT$500 billion in Taiwan capital expenditure for 2026, including new fabrication plants and advanced packaging sites to alleviate tight supply at 3nm and future nodes. The company has also commenced work on its first 1.4nm fab, targeting production in 2028, while raising its 2025 capex guidance to $40 billion to $42 billion.
Demand trends remain favorable. Apple and AMD are said to be expanding wafer orders into 2025 and 2026, contributing to strong stock performance. Over the past year, shares have risen 65%, significantly outpacing the S&P 500.
TSMC is not inexpensive, however. Its current forward price-to-earnings ratio stands at 26 times, and the EV/EBITDA multiple is around 16 times. These multiples are high by broad industry standards, reflecting TSMC's premium positioning and growth prospects. Many semiconductor peers trade in the mid-teens on a forward P/E basis. TSMC stock's valuation is roughly in line with, or slightly above, the sector median. The stock appears fairly valued given its dominant market share and growth runway, rather than deeply cheap.
Just days ago, TSMC provided investors with a solid preview of its fourth-quarter performance. The company stated that Q4 revenue reached NT$1.046 trillion, or about $33.1 billion, up 20% from a year earlier. This result beat consensus expectations and fell squarely within management's prior guidance range.
According to the company, surging demand for AI chips more than offset lingering weakness in consumer electronics. The strong update led several analysts to raise their 2026 revenue forecasts, shifting focus to the Jan. 15 earnings call for updated guidance.
Profitability should also appear healthy. Analysts anticipate Q4 earnings to rise meaningfully, supported by gross margins near 60%. Free cash flow remains a major strength, with approximately $28 billion generated over the past 12 months and a cash-rich balance sheet that supports heavy investment and shareholder returns.
Looking ahead, Wall Street expects conservative but upbeat Q1 guidance and strong full-year 2026 growth, driven by AI demand. CEO C.C. Wei has repeatedly emphasized that AI demand remains stronger than expected, a message investors will be listening for again on Jan. 15.
Wall Street has turned sharply bullish on TSMC stock. Notably, Goldman Sachs increased its price target by 35% to NT$2,330 in early January, calling AI "a multi-year growth engine" for TSMC. JPMorgan followed with a raise to NT$2,100, forecasting roughly 30% revenue growth in 2026 thanks to AI demand.
Morgan Stanley also upgraded its view on Dec. 18, hiking its target to NT$1,888 and reaffirming an "Overweight" rating. Morgan Stanley analysts noted that higher wafer prices and strong AI chip orders should drive better-than-normal Q1 2026 revenues.
Analysts highlight TSMC's dominant node leadership, improving margins, and long cycle of capital expenditure from AI. This contrasts with peers like Intel, which is lagging in advanced process technology. Across the board, the consensus among 14 analysts tracked by Barchart is a "Strong Buy." The mean price target is $352.67, implying about 6% upside potential.