TSM AI Stock Analysis – Buy, Hold, or Avoid?
Taiwan Semiconductor Manufacturing Company Limited (TSM)
TSMC stands out as a fundamentally robust, industry-leading semiconductor foundry with strong growth, profitability, and a fair valuation relative to peers. While short-term technicals and sentiment are mixed due to recent volatility and geopolitical risk, the long-term investment case remains compelling, supported by secular AI demand and resilient financials. Pullbacks present attractive entry points for long-term investors, though near-term caution is warranted for traders.
Fundamentals
TSMC demonstrates exceptional fundamental strength, highlighted by robust revenue and earnings growth, industry-leading profitability, and consistent outperformance on quarterly results. While valuation is rich and volatility can be pronounced, TSMC’s technological leadership positions it as a cornerstone in global semiconductor supply chains.
Financial Highlights
- Revenue
- Net Income
- Net Margin (%)
Revenue
21.59% YoY
Q4 2025
Net Income
41.89% YoY
Q4 2025
Net Margin
Q4 2025
Growth Metrics
Revenue Growth YoY
Latest Quarter: Q4 2025
Net Income Growth YoY
Latest Quarter: Q4 2025
Revenue Per Share Growth YoY
Latest Quarter: Q4 2025
EPS Growth YoY
Latest Quarter: Q4 2025
Book Value Per Share Growth YoY
Latest Quarter: Q4 2025
| Q4 2025 | Q3 2025 | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | |
|---|---|---|---|---|---|---|---|---|
| Revenue | 1.1T | 989.9B | 933.8B | 839.3B | 868.5B | 759.7B | 673.5B | 592.6B |
| Revenue Growth YoY | +21.59% | +30.31% | +38.65% | +41.61% | +38.84% | +38.95% | +40.07% | +16.52% |
| Net Income | 510.5B | 452.3B | 398.3B | 361.6B | 359.8B | 325.3B | 247.8B | 225.5B |
| Net Income Growth YoY | +41.89% | +39.06% | +60.69% | +60.35% | +50.72% | +54.15% | +36.33% | +8.94% |
| EPS | $98.40 | $87.20 | $76.80 | $69.70 | $69.40 | $62.75 | $47.80 | $43.50 |
| EPS Growth YoY | +41.79% | +38.96% | +60.67% | +60.23% | +50.71% | +54.18% | +36.38% | +9.02% |
Profitability Metrics
Gross Margin
TTM
Operating Margin
TTM
Net Margin
TTM
Return on Equity
TTM
Return on Assets
TTM
| Q4 2025 | Q3 2025 | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | |
|---|---|---|---|---|---|---|---|---|
| Gross Margin | 62.33% | 59.45% | 58.62% | 58.79% | 59.00% | 57.83% | 53.17% | 53.07% |
| Operating Margin | 53.90% | 50.58% | 49.63% | 48.51% | 49.02% | 47.49% | 42.55% | 42.02% |
| Net Margin | 48.35% | 45.69% | 42.65% | 43.08% | 41.43% | 42.81% | 36.80% | 38.05% |
| Return on Equity (ROE) | 9.33% | 9.05% | 8.69% | 7.92% | 8.83% | 8.15% | 6.54% | 6.20% |
| Return on Assets (ROA) | 6.38% | 6.17% | 5.70% | 5.09% | 5.62% | 5.29% | 4.16% | 3.91% |
Technical Analysis
TSM is currently in a strong primary uptrend supported by bullish moving average positioning and institutional accumulation signals. Despite some short-term momentum weakness indicated by a neutral RSI and low ADX, the stock trades near key support levels with no immediate resistance overhead, signaling potential for continued upside. However, mixed MACD readings and recent price dips suggest caution in the near term while watching support around $340 to $300.
No extreme reading
Price in uptrend
Range-bound market
50 above 200 - bullish
Key Technical Values
Price with Moving Averages
50-day, 150-day and 200-day simple moving averages
Relative Strength Index
Momentum oscillator measuring speed and magnitude of price changes
RSI (14)
Earnings
TSMC demonstrates exceptional fundamental strength, highlighted by robust revenue and earnings growth, industry-leading profitability, and consistent outperformance on quarterly results. While valuation is rich and volatility can be pronounced, TSMC’s technological leadership positions it as a cornerstone in global semiconductor supply chains.
Latest Earnings
Q4 2025 Earnings (Dec 31, 2025)
Earnings Per Share (EPS)
Actual
$3.09
Estimated
$2.90
Surprise
+$0.19
Surprise %
+6.55%
Revenue
Actual
$33.14B
Estimated
$33.01B
Surprise
+$130.27M
Surprise %
+0.39%
Historical Earnings
| Q4 2025 | Q3 2025 | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | |
|---|---|---|---|---|---|---|---|---|
| Earnings Per Share | ||||||||
| EPS (Actual) | $3.09 | $2.85 | $2.61 | $2.14 | $2.19 | $1.95 | $1.47 | $1.34 |
| EPS (Estimated) | $2.90 | $2.63 | $2.38 | $2.07 | $2.20 | $1.79 | $1.41 | $1.30 |
| EPS Surprise | +$0.19 | +$0.22 | +$0.23 | +$0.07 | -$0.01 | +$0.16 | +$0.06 | +$0.04 |
| % Diff | +6.6% | +8.4% | +9.7% | +3.4% | -0.5% | +8.9% | +4.3% | +3.1% |
| Revenue | ||||||||
| Revenue (Actual) | $33.14B | $32.36B | $31.75B | $25.8B | $26.38B | $23.6B | $20.66B | $18.32B |
| Revenue (Estimated) | $33.01B | $32.07B | $30.21B | $25.46B | $26.24B | $23.31B | $20.33B | $18.32B |
| Revenue Surprise | +$130.27M | +$286.73M | +$1.54B | +$343.82M | +$137.67M | +$293.01M | +$332.06M | +$5.31M |
| % Diff | +0.4% | +0.9% | +5.1% | +1.4% | +0.5% | +1.3% | +1.6% | +0.0% |
Valuation
Taiwan Semiconductor Manufacturing Company (TSM) currently trades at valuation multiples notably below its semiconductor peer group averages despite robust financial health and strong growth prospects. The company demonstrates impressive earnings and revenue growth supported by market leadership in the pure foundry segment and favorable industry tailwinds like AI chip demand. Analyst consensus reflects a positive outlook with price targets implying a moderate upside from current levels.
Valuation Metrics
Price to Earnings
TTM
Price to Sales
TTM
Price to Book
TTM
Enterprise Value to EBITDA
TTM
Enterprise Value to Revenue
TTM
| Q4 2025 | Q3 2025 | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | |
|---|---|---|---|---|---|---|---|---|
| Price to Earnings | 19.87 | 18.71 | 17.25 | 16.31 | 18.60 | 19.07 | 25.32 | 22.14 |
| Price to Sales | 38.43 | 34.19 | 29.43 | 28.11 | 32.10 | 32.66 | 37.27 | 33.69 |
| Price to Book | 7.42 | 6.77 | 6.00 | 5.17 | 6.57 | 6.22 | 6.62 | 5.49 |
| Enterprise Value to EBITDA | 51.03 | 46.97 | 39.63 | 36.58 | 44.95 | 43.15 | 51.31 | 45.01 |
| Enterprise Value to Revenue | 36.73 | 32.65 | 27.88 | 26.47 | 30.86 | 31.53 | 36.12 | 32.52 |
Sentiment & Analyst Ratings
TSM sentiment is currently mixed due to recent market volatility and geopolitical concerns impacting chip stocks broadly, despite strong company-specific fundamentals. Analysts largely remain bullish, emphasizing robust AI-driven demand projections and significant capital investments supporting future growth, though retail investors show a cautious optimism amid profit-taking.
Analyst Recommendations
Risk Assessment
Taiwan Semiconductor Manufacturing Company (TSMC) currently exhibits strong financial health with robust liquidity and low leverage, supporting its ability to manage near-term obligations and invest in growth. However, it faces elevated geopolitical risks, regulatory challenges, and operational cost pressures from overseas expansions. While market sentiment remains positive with bullish analyst ratings, cyclicality and competitive intensity in the semiconductor industry present material risks.
Liquidity & Solvency
Current Ratio
Latest Quarter: Q4 2025
Quick Ratio
Latest Quarter: Q4 2025
Debt-to-Equity
Latest Quarter: Q4 2025
Debt-to-Assets
Latest Quarter: Q4 2025
| Q4 2025 | Q3 2025 | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | |
|---|---|---|---|---|---|---|---|---|
| Liquidity Metrics | ||||||||
| Current Ratio | 2.62 | 2.69 | 2.37 | 2.39 | 2.36 | 2.57 | 2.47 | 2.39 |
| Quick Ratio | 2.42 | 2.47 | 2.15 | 2.18 | 2.14 | 2.30 | 2.21 | 2.13 |
| Solvency Metrics | ||||||||
| Debt-to-Equity | 0.18 | 0.19 | 0.20 | 0.22 | 0.25 | 0.26 | 0.27 | 0.28 |
| Debt-to-Assets | 0.13 | 0.13 | 0.13 | 0.14 | 0.16 | 0.17 | 0.17 | 0.17 |
Liquidity Assessment
Current Ratio: 2.62(Strong)
Quick Ratio: 2.42(Strong)
The company has strong liquidity with sufficient short-term assets to cover liabilities.
Solvency Assessment
Debt-to-Equity: 0.18(Low)
Debt-to-Assets: 0.13(Low)
The company has conservative debt levels, indicating low financial risk and strong long-term solvency.
Frequently Asked Questions about TSM
AI Answers: Common Questions About TSM
Get AI-powered answers to the questions investors ask most about Taiwan Semiconductor Manufacturing Company Limited
TSMC is a good buy for long-term investors, trading at a P/E of 33.3—below sector averages—despite industry-leading growth (FY25 revenue +32.9%, EPS +49.8%) and expanding margins. The current price ($353.13) is near strong support, and valuation is justified by robust fundamentals and dominant market share.
Unless your thesis has changed or you need to reduce risk exposure, selling is not warranted: fundamentals remain strong, valuation is fair, and technicals do not show a breakdown. Short-term volatility is driven by external factors, not company weakness.
The biggest risks are geopolitical (Taiwan/China tensions, US trade policy), industry cyclicality, and cost pressures from overseas fabs. Sentinel notes TSMC's debt/equity is low (0.18) and liquidity is strong (current ratio >2.6), but external shocks could compress multiples or margins.
Analyst price targets average $400-$420 (8-15% upside), with technical resistance at $388-$393 and potential extension to $406.80 if a breakout occurs. Key support is at $340 and $300, with downside risk if these levels fail.
TSMC is fairly valued: its P/E (33.3) and EV/EBITDA are below sector averages and justified by superior margins (gross >59%, net >45%) and growth. The market is pricing in both growth and risk, but not at excessive levels.
TSMC is fundamentally strong, with double-digit revenue and EPS growth, expanding margins, high ROE (>30%), and a fortress balance sheet (debt/equity 0.18, current ratio >2.6). Earnings quality is high, with minimal one-offs and strong cash flow.
Technically, TSM is in a primary uptrend (golden cross, price above all SMAs), but short-term momentum is neutral (RSI ~48, low ADX). Key support is at $340-$345; a breakout above $388-$393 would signal renewed upside.
Key catalysts include upcoming earnings (with a strong beat/miss track record), AI chip demand surges, new process technology launches, and any resolution or escalation of geopolitical tensions.
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