TSMC (TSM): AI Boom, Revenue Upside, and Attractive Valuation Through 2027

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is one of the must-buy AI stocks to invest in. On December 18, Morgan Stanley told clients to ramp up their positions in Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) right away. The investment bank explained that it expects a powerful AI‑driven upcycle, faster growth than the market expects, and rising profitability into 2026. To back up the claim, the lead analyst, Charlie Chan, raised the price target for TSMC shares to NT$1,888 from the previous NT$1,688. He also kept an Overweight rating on the stock.

Morgan Stanley expects TSMC to guide 2026 revenue growth in the mid‑20% range, but believes the company will actually deliver closer to 30% year‑over‑year growth. The bank models 2026 revenue growth of 30%, which it says is well above the Street consensus of 22%. Chan and his team argue that consensus underestimates both the strength and durability of TSMC’s AI and advanced‑node demand. This, they said, creates upside as that growth is recognized.

The analysts tied their higher growth view directly to heavy investment. They stated that they arrived at that 30% revenue growth forecast “based on the forecast 2026 capital expenditure of $49 billion and continued 3‑nanometer capacity expansion.” The analysts also argued that the stock remains attractive at 16x or 13x our 2026/2027 average EPS, even after the target hike.

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the world’s largest contract chipmaker. It produces advanced semiconductors used in AI training and inference, including GPUs and custom accelerators.

While we acknowledge the potential of TSM as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

READ NEXT: 11 Best NYSE Stocks Under $5 to Buy and 11 Best Healthcare AI Stocks to Buy Now.

Disclosure: None. This article is originally published at Insider Monkey.