TSMC Stock Soars Amid AI Chip Demand: Should You Sell or Invest More?
Taiwan Semiconductor Manufacturing Company (TSMC) is experiencing significant growth, particularly due to soaring demand for artificial intelligence (AI) chips. The company’s stock price recently surged, showcasing positive quarterly results and a robust forecast. Over the past year, TSMC’s shares have increased by approximately 70%.
Current TSMC Stock Performance
As of the latest update, TSMC’s stock price stands at $328.29, reflecting a change of -4.12%. Here are some key financial data points:
- Market Capitalization: $1.8 trillion
- 52-week Price Range: $134.25 – $351.33
- Daily Trading Range: $328.18 – $342.09
- Volume: 894,000 shares
- Average Volume: 13 million shares
- Gross Margin: 59.02%
- Dividend Yield: 0.90%
Growing Demand for AI Chips
The demand for AI chips is insatiable, driving TSMC’s revenue growth. The company projects its capital expenditures for this year will range between $52 billion and $56 billion, significantly exceeding analyst expectations of around $41 billion for 2026.
Management has indicated strong ongoing spending from leading cloud computing companies. They are constantly seeking more capacity to meet rising demand.
Market Leadership in Advanced Technology
TSMC is a leader in the production of advanced semiconductor nodes. The reduction in node sizes is crucial for enhancing processing power and energy efficiency. As competitors struggle with yield rates, TSMC has established a significant market position.
In the fourth quarter, nodes of 7 nanometers (nm) and below comprised 77% of TSMC’s revenue, an increase from 74% the previous year. Additionally, its 3-nm technology accounted for 28% of wafer revenue, up from 26% in the prior year.
Quarterly Financial Highlights
- Q4 Revenue: $33.7 billion, a 26% increase year-over-year
- Earnings Per Share (ADR): $3.14, a 40% growth from $2.24 a year ago
- Gross Margin: 62.3%, up 330 basis points from the previous forecast
- Operating Margin: 54%, an increase of 500 basis points
Future Projections
TSMC forecasts its first-quarter revenue between $34.6 billion and $35.8 billion, suggesting approximately 38% growth year-over-year. For the entire year, the company anticipates around 30% revenue growth. Despite potential challenges from overseas expansion, TSMC expects strong gross margins ranging from 63% to 65% in the first quarter.
Investment Outlook
With its leading position in AI infrastructure and consistent revenue growth, TSMC remains an attractive investment. Its forward price-to-earnings (P/E) ratio is currently below 21, while the price/earnings-to-growth (PEG) ratio stands at 0.7. Stocks valued under a PEG ratio of 1 are typically seen as undervalued.
The favorable growth outlook suggests that instead of selling, investors may consider increasing their position in TSMC stock to capitalize on its strong market performance and growth potential in the AI sector.
