TSMC's Strong Guidance Supports the Stock's Hot Start to 2026

After a fantastic 2025, shares of Taiwan Semiconductor Manufacturing (NYSE: TSM) aren’t looking back to start the new year. Following their 55% return last year, TSMC shares are already up more than 12% in 2026. Two key events are helping the stock move higher: export control news and earnings. These developments support the bullish outlook on TSMC going forward, making the stock one of the best ways to play the artificial intelligence investment theme. All data is as of the Jan. 15 close unless otherwise indicated.

United States Supports TSMC’s Mature Node Operations in China

To start the year, reports emerged that the U.S. government granted a key license to TSMC that lends support to its business in China. The United States will allow the company to import domestically made chip manufacturing equipment to its plant in Nanjing, China.

This allows the company to continue operating its Nanjing facility without interruptions or production delays. On Jan. 2, TSMC shares rose by over 5% following the news announced after the close on Jan. 1.

The Jan. 2 surge was likely not entirely due to the announcement of U.S. support—Nanjing produces a relatively small percentage of TSM's total revenue (about 2.4% of total revenue in 2024), meaning that the positive effects of the announcement are limited.  

Rather, the upward momentum for TSM stock on Jan. 2 is best understood in the context of the semiconductor sector, which traded higher as a whole that day.

One popular chip ETF, the iShares Semiconductor ETF (NASDAQ: SOXX), rose almost 4.2% that day. This shows that the export news was a "cherry on top" that helped TSMC shares outperform its industry.

TSMC Posts Earnings Beats, Guidance Shines

Much more consequential news for TSMC came on Jan. 15. Shares rose approximately 4.4% that day as markets reacted to the company’s latest earnings report for Q4 2025. The company reported revenue of $33.7 billion, or a growth rate of 25.5%. This came in solidly above estimates of $31.9 billion, or 18.7% growth.

However, the company’s bottom-line metrics were even more impressive. TSMC generated diluted earnings per American Depository Receipt (ADR) of $3.14, an increase of 40% versus a year ago. This beat the projections of around $2.82, or 26% growth, by a large margin.

Still, the most notable aspect of the company’s report wasn’t what happened in 2025, but instead its future projections. In terms of U.S. dollars, TSMC forecasts that its full-year revenue will rise by “close to 30%” in 2026.

This indicates only a very slight deceleration in revenue growth. In 2025, full-year sales rose 31.6%. This was music to investors' ears, with many expecting a much more material slowdown in revenue growth.

The company also boosted its long-term guidance. Over the five-year period starting in 2024, TSMC expects U.S. dollar revenue to increase at a compound annual growth rate (CAGR) near 25%.

This compares very strongly to its previous long-term CAGR guidance of 20%. In AI accelerator-specific revenue, TSMC boosted its outlook as well. It now projects this revenue stream to approach a “mid-to-high 50% CAGR” from 2024 to 2029. This is significantly above its previous estimate of a mid-40% CAGR during that period.

Further supporting the company’s long-term outlook was TSMC’s capital expenditure (CapEx) guidance. At the midpoint, the company expects to spend $54 billion on CapEx in 2026. This would be an approximately 32% increase over the firm’s 2025 CapEx spending of $40.9 billion. Companies typically don’t commit to significant CapEx increases unless they are confident in long-term demand, as these investments take several years to pay off. Thus, TSMC clearly believes that there is a lot of opportunity ahead of it, particularly in megatrends like 5G, AI, and high-performance computing (HPC).

However, the company notes that its depreciation expense should rise significantly in 2026. It also believes that the expanding scale of its overseas operations will dilute gross margin by 2% to 4% over the coming years. Still, these are acceptable concessions for the company to make to support the robust demand it projects.

Updated Price Target Projects Significant Gains Ahead for TSMC

Overall, TSMC continues to show why it is a stalwart company within the semiconductor and AI investment theme. The company keeps performing very well and upgrading its forecasts, making it difficult not to be bullish on the stock. The consensus price target of $365 implies 7% upside in shares. However, analysts at Needham and Company raised their price target from $360 to $410 after the results. Needham’s new target implies a strong upside of 20%.

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The article "TSMC's Strong Guidance Supports the Stock's Hot Start to 2026" first appeared on MarketBeat.