TSM Stock Forecast & Price Target

Taiwan Semiconductor Manufacturing Co. (TSMC) is projected to achieve a sequential revenue growth of approximately 4% in the first quarter of 2026, demonstrating effective capacity planning that benefits its high-performance computing (HPC) customer segment, even during a traditionally slower demand period for smartphones. The company's earnings per American Depositary Share (ADS) for calendar year 2026 have been revised upwards from $12.13 to $12.61, reflecting strong fundamentals and growing operational efficiency. Additionally, TSMC anticipates AI revenue to grow at a compound annual growth rate (CAGR) of 55-59% from 2024 to 2029, with overall revenue CAGR being raised to nearly 25%, indicating robust demand and strategic positioning for future growth in the semiconductor market.

Taiwan Semiconductor Manufacturing Co. (TSMC) is anticipated to face challenges due to its high capital intensity, projected at around 33% for the year, which may lead to difficulties in managing capital expenditures and capacity utilization, adversely affecting gross margins. The company's guidance for Q4 indicates a slight revenue decline of 1% QoQ, raising concerns about future growth sustainability, especially against a backdrop of potentially declining spending in the foundry/logic sectors, particularly from China. Additionally, any reduction in capacity utilization could significantly erode gross margin, with estimates suggesting that a mere 1% drop could reduce gross margins by 40 basis points, highlighting the fragility of TSMC's operational efficiency.