Revenue Continues to Rise at Taiwan Semi. Is Now the Time to Invest in TSM Shares for 2026?

Semiconductor Stocks Surge Amid AI Boom

Recently, semiconductor shares have experienced remarkable growth, fueled by soaring demand for artificial intelligence technologies and increased investment in data centers. In 2025, Nvidia (NVDA) saw its stock price climb by approximately 30%, while Intel (INTC) surged over 80%. Other specialized chipmakers also posted significant gains. Taiwan Semiconductor Manufacturing Company (TSMC), the largest contract chip producer globally, has emerged as a standout performer, directly benefiting from the rapid adoption of AI by major clients like Nvidia and Apple (AAPL).

This industry-wide momentum has positively impacted the entire supply chain, resulting in higher orders and revenues for top foundries such as TSMC. Just last week, TSMC reported a robust 20% year-over-year increase in fourth-quarter revenue, surpassing analyst forecasts and reinforcing its strong growth trajectory.

With this strong momentum expected to continue into 2026, many investors are wondering if TSMC shares still have further upside potential.

Overview of TSMC Stock

Established in 1987, Taiwan Semiconductor Manufacturing Company pioneered the pure-play foundry business model and has grown to become the world’s leading contract chipmaker. TSMC manufactures advanced logic chips for industry giants such as Nvidia, Apple, and AMD (AMD), utilizing cutting-edge technologies like 3-nanometer and 5-nanometer nodes. This positions the company at the heart of the global AI and data center ecosystem.

TSMC is reinforcing its leadership through substantial capital investments. Reports indicate the company plans to allocate between NT$450 billion and NT$500 billion in capital expenditures in Taiwan for 2026, including new fabrication plants and advanced packaging facilities to address supply constraints at 3nm and future nodes. Construction has also begun on its first 1.4nm facility, slated for production in 2028, and TSMC has raised its 2025 capital expenditure guidance to between $40 billion and $42 billion.

Demand remains robust, with Apple and AMD reportedly increasing wafer orders through 2025 and 2026, contributing to TSMC’s impressive stock performance. Over the past year, TSMC shares have soared 65%, significantly outperforming the S&P 500 ($SPX).

Despite its strong position, TSMC shares are not considered undervalued. The forward price-to-earnings (P/E) ratio stands at 26, and the EV/EBITDA multiple is about 16—both above the industry average, reflecting TSMC’s premium status and growth outlook. For comparison, many semiconductor companies trade at forward P/E ratios in the mid-teens. Thus, TSMC’s valuation is roughly at or slightly above the sector median, appearing fairly priced given its dominant market share and growth prospects, but not deeply discounted.

TSMC’s Q4 Results and Future Prospects

TSMC recently provided a preview of its fourth-quarter results, announcing revenue of NT$1.046 trillion (approximately $33.1 billion), a 20% increase from the previous year. This figure exceeded market expectations and was within the company’s earlier guidance.

The company attributed this strong performance to surging demand for AI chips, which more than compensated for ongoing softness in consumer electronics. The positive update led several analysts to raise their 2026 revenue projections, with attention now turning to the January 15 earnings call for further guidance.

Profitability is also expected to remain strong. Analysts project a significant increase in fourth-quarter earnings, supported by gross margins close to 60%. TSMC continues to generate substantial free cash flow—about $28 billion over the past year—and maintains a cash-rich balance sheet that enables continued investment and shareholder returns.

Looking forward, analysts anticipate cautious but optimistic guidance for the first quarter and robust growth for the full year 2026, largely driven by ongoing AI demand. CEO C.C. Wei has repeatedly highlighted that AI-related demand is exceeding expectations, a point investors will be watching for during the upcoming earnings call.

Analyst Views and Price Targets for TSMC

Analysts on Wall Street have become increasingly optimistic about TSMC’s outlook. In early January, Goldman Sachs raised its price target by 35% to NT$2,330, describing AI as a long-term growth catalyst for the company. JPMorgan also increased its target to NT$2,100, projecting around 30% revenue growth in 2026 due to AI-driven demand.

On December 18, Morgan Stanley upgraded its rating and lifted its price target to NT$1,888, maintaining an “Overweight” stance. The firm’s analysts cited higher wafer prices and robust AI chip orders as key drivers for above-average first-quarter 2026 revenues.

Experts point to TSMC’s technological leadership, improving margins, and extended investment cycle fueled by AI as major strengths—setting it apart from competitors like Intel, which trails in advanced manufacturing processes. According to Barchart, all 14 analysts surveyed rate TSMC as a “Strong Buy,” with an average price target of $352.67, suggesting about 6% potential upside.