TSM Bets on A16 Node: Will It Give an Edge in the AI Data Center Race?

Taiwan Semiconductor Manufacturing Company TSM, also known as TSMC, is preparing to launch its A16 process technology, with volume production expected in the second half of 2026. The A16 node, which is an extension of its 2nm platform, introduces Super Power Rail (“SPR”) technology, which enhances power delivery and efficiency.

Compared to the N2P process, A16 promises 8% to 10% speed gains or 15% to 20% better power efficiency, along with a further increase in chip density. These improvements are significant for artificial intelligence (AI) data centers, where performance and energy use are critical.

AI infrastructure has become increasingly power-hungry, with hyperscalers and chip designers seeking solutions that balance computational speed with electricity costs. Taiwan Semiconductor’s A16 node is positioned to address these needs. If widely adopted, it could help the company secure more business from leading AI chipmakers and cloud providers.

Taiwan Semiconductor continues to lead the global chip foundry market. Its scale and technology make it the first choice for companies driving the AI boom. The company’s latest earnings report highlights its continued dominance. In the second quarter of 2025, TSMC’s revenues surged 44% year over year. This growth was powered by the booming demand for its advanced 3nm and 5nm nodes, which now account for 58% of total wafer sales.

The A16 bet highlights Taiwan Semiconductor’s strategy to stay ahead in the AI arms race. A timely rollout could cement its dominance in data center chips, but any delays or weaker-than-expected uptake may limit the advantage. The node’s rollout will be a critical factor in TSMC’s long-term AI growth story. The Zacks Consensus Estimate for 2025 and 2026 revenues indicates a year-over-year increase of 35.9% and 14.5%, respectively.

How Are TSMC’s Rivals Working on AI Chip Manufacturing?

Intel INTC and GlobalFoundries GFS are also expanding their presence in AI chip manufacturing.

Intel is investing heavily in its foundry business, aiming to produce advanced chips. The company is currently focusing on its 18A process, which signifies 1.8nm chips. Intel’s 18A process is claimed to have higher performance and efficiency, which will help the company better compete with Taiwan Semiconductor’s upcoming N2 chips.

GlobalFoundries focuses more on mature nodes. However, the company is witnessing some AI-related demand, especially in edge computing and embedded AI. GlobalFoundries is working to expand capacity in the United States and Europe to attract customers looking for supply-chain flexibility.

TSM’s Share Price Performance, Valuation and Estimates

Shares of Taiwan Semiconductor have risen around 42.2% year to date compared with the Zacks Computer and Technology sector’s gain of 22.6%.

Taiwan Semiconductor YTD Price Return Performance

From a valuation standpoint, TSM trades at a forward price-to-earnings ratio of 26.32, lower than the sector’s average of 29.45.

Taiwan Semiconductor Forward 12-Month P/E Ratio

The Zacks Consensus Estimate for Taiwan Semiconductor’s 2025 and 2026 earnings implies a year-over-year increase of 39.6% and 11.6%, respectively. Estimates for 2025 and 2026 have been revised downward in the past 60 days.

Taiwan Semiconductor currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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