AI-Driven Demand for Advanced Chips Likely to Boost TSM's Q4 Revenues

Taiwan Semiconductor Manufacturing Company Ltd. TSM is scheduled to release its fourth-quarter 2025 earnings on Jan. 15. The world’s top contract chipmaker looks well-positioned for another strong quarter, supported by the surging demand for artificial intelligence (AI) chips and its leadership in advanced semiconductor technologies.

Click here to know how TSM’s overall fourth-quarter results are likely to be.

Advanced Nodes Drive TSM’s Revenue Growth

Taiwan Semiconductor projects fourth-quarter revenues to come between $32.2 billion and $33.4 billion, implying a year-over-year increase of approximately 22% at the midpoint. The Zacks Consensus Estimate for the top line is pegged at $32.63 billion, indicating year-over-year growth of 21.4%.

The growing adoption of AI in cloud services, consumer devices and data centers continues to fuel the need for powerful, energy-efficient chips. TSMC remains a key beneficiary of this trend. Its dominance in 3-nanometer (3nm) and 5-nm manufacturing nodes has been central to this surge, as major chip designers like NVIDIA, Apple and Advanced Micro Devices rely heavily on its cutting-edge processes.

Taiwan Semiconductor has been witnessing strong demand for its AI-focused products, including Chip-on-Wafer-on-Substrate advanced packaging solutions. This segment has seen consistent demand exceeding supply, reflecting the company’s critical role in powering AI and high-performance computing applications.

Despite its strengths, Taiwan Semiconductor witnesses near-term hurdles. Geopolitical tensions, particularly between the United States and China, are expected to have impacted the company’s overall revenue growth in the to-be-reported quarter.

Overseas Expansions to Hurt TSM’s Margins

While revenue momentum looks solid, rising operational costs are likely to have hurt Taiwan Semiconductor’s gross margin in the to-be-reported quarter. Taiwan Semiconductor’s aggressive global expansion — with new fabs in Arizona, Japan and Germany — has added cost burdens from higher labor and utility expenses. These sites, though strategically important for geographic diversification and customer proximity, are expected to reduce gross margins by 2-3% annually over the next few years as production ramps up.

Despite the prevailing challenges, analysts remain optimistic about TSM’s bottom-line growth in the to-be-reported quarter. The Zacks Consensus Estimate for Taiwan Semiconductor’s fourth-quarter earnings has been revised upward by 4 cents to $2.76 per share, indicating year-over-year growth of 21.4%.

TSM’s Zacks Rank & Stocks to Consider

Currently, Taiwan Semiconductor carries a Zacks Rank #4 (Sell).

Some better-ranked stocks worth considering in the broader Zacks Computer and Technology sector are Micron Technology MU, NVIDIA NVDA and Amtech Systems ASYS, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Micron Technology’s fiscal 2026 earnings has been revised upward by 73.2% to $31.36 per share in the past 30 days, suggesting an increase of 278.3% from fiscal 2025’s reported figure. Micron Technology shares have surged 264% over the past year.

The Zacks Consensus Estimate for NVIDIA’s fiscal 2026 earnings has moved upward by 20 cents to $4.66 per share in the past 60 days, implying a year-over-year improvement of approximately 55.9%. NVIDIA shares have risen 38.7% in the trailing 12 months.

The Zacks Consensus Estimate for Amtech Systems’ fiscal 2026 earnings has moved northward by 186.7% to 43 cents per share over the past 30 days and suggests a year-over-year increase of 760%. Amtech Systems shares have soared 156.2% over the past year.

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

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