TSM AI Stock Analysis – Buy, Hold, or Avoid?
Taiwan Semiconductor Manufacturing Company Limited (TSM)
TSMC offers a compelling investment case across all timeframes, driven by industry-leading fundamentals, robust earnings growth, and strong technical momentum. While valuation is above historical averages, it is justified by exceptional profitability and dominant market position in AI and advanced semiconductors. Geopolitical and capital intensity risks remain, but the risk/reward profile is attractive for long-term investors.
Fundamentals
TSMC displays robust financial health and industry-leading profitability, underpinned by its dominant position in advanced semiconductor manufacturing. Revenue and EPS have accelerated sharply over the past year, outpacing estimates, and reflect both secular demand and technological leadership. Profitability metrics are trending higher, affirming resilient margins and earnings quality.
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) | 6.40% | 6.17% | 5.70% | 5.09% | 5.62% | 5.29% | 4.16% | 3.91% |
Technical Analysis
TSM is currently in a strong uptrend, trading above all key moving averages with a golden cross confirmed. Momentum is moderate but positive, supported by institutional accumulation in the advancing phase. Price is near its 52-week high, indicating a bullish trend with potential for further gains.
No extreme reading
Price in uptrend
Trend developing
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 displays robust financial health and industry-leading profitability, underpinned by its dominant position in advanced semiconductor manufacturing. Revenue and EPS have accelerated sharply over the past year, outpacing estimates, and reflect both secular demand and technological leadership. Profitability metrics are trending higher, affirming resilient margins and earnings quality.
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
TSM currently commands a premium valuation reflective of its leadership in semiconductor manufacturing, strong growth driven by AI demand, and substantial ongoing capital expenditures to expand capacity. While trading above historical and some peer multiples, its robust earnings growth, high margins, and solid financial health underpin this premium. Market sentiment remains bullish, corroborated by optimistic analyst targets, although geopolitical risks and rising costs pose potential valuation constraints.
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 | 51.12 | 46.97 | 39.63 | 36.58 | 44.95 | 43.15 | 51.31 | 45.01 |
| Enterprise Value to Revenue | 36.80 | 32.65 | 27.88 | 26.47 | 30.86 | 31.53 | 36.12 | 32.52 |
Sentiment & Analyst Ratings
Taiwan Semiconductor Manufacturing Company (TSM) enjoys a predominantly positive market sentiment driven by robust revenue growth fueled by AI demand and strong analyst buy ratings. However, valuation concerns and geopolitical risks temper this enthusiasm, creating a cautiously optimistic investor outlook. Recent institutional buying and high-profile price target increases underpin confidence in the stock's medium-to-long-term growth prospects.
Analyst Recommendations
Risk Assessment
TSMC demonstrates a robust financial foundation characterized by high current and quick ratios indicating very strong short-term liquidity, alongside a conservative capital structure with low leverage. The company is positioned advantageously in a growth-driven semiconductor sector, although it faces notable risks including geopolitical tensions, high capital expenditures, talent shortages, and operational challenges related to energy dependency and global expansion costs. These factors create a balance of moderate risk against strong fundamentals and leading market position.
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 | 0.20 | 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: 0.20(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 at current levels for most investors: it trades at a P/E of 35.77 and near its 52-week high ($390.21), but this premium is justified by 33% YoY revenue growth, 48% net margins, and sector-leading profitability. Technicals are bullish and institutional sentiment is strong, making pullbacks toward $350-$355 attractive entry points.
There is no strong reason to sell TSMC now unless you have a short-term profit-taking strategy or need to reduce exposure to Taiwan/geopolitical risk. Fundamentals and technicals remain robust, with recent earnings beats and momentum suggesting further upside; only consider trimming if valuation or macro risks escalate significantly.
The biggest risks are geopolitical—cross-strait tensions could disrupt operations or supply chains, and TSMC's moderate overall risk profile is driven by this factor. High capital expenditures ($52-56B) and reliance on a few major customers also pose risks, but liquidity is strong (current ratio >2.6, debt/equity ~0.20), mitigating short-term financial stress.
Technical resistance is at $390.21 (52-week high), with analyst price targets as high as $600 reflecting bullish long-term expectations. Support is at the 50 SMA ($350.58); a breakout above $390 could see further upside, while pullbacks to the $350-$355 range offer attractive risk/reward.
TSMC is trading above historical and sector averages (P/E 35.77, high EV/EBITDA and P/S), but this is justified by rapid earnings growth, high margins, and dominant market position. Valorem rates it as 'fairly valued' given its growth premium and operational strength, though further multiple expansion may depend on continued execution.
TSMC is fundamentally very strong, with 33% revenue growth, 50%+ EPS growth, net margins at 48%, and ROE above 25%. Its balance sheet is robust (current ratio >2.6, low leverage), and it consistently beats earnings expectations, underpinned by leadership in advanced semiconductors and AI chips.
Technical analysis is bullish: price is above all major SMAs, golden cross confirmed, RSI at 62.6 (not overbought), and strong institutional accumulation. Upside resistance is $390.21, with support at $350.58; trend continuation is likely unless a major reversal pattern emerges.
Key catalysts include upcoming earnings (with a track record of beats), continued AI-driven demand, new advanced node launches, and progress on international fab expansions. Macro events, especially related to Taiwan/China relations, could also impact the stock significantly.
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