Bull of the Day: Taiwan Semiconductor Manufacturing Company (TSM)

Taiwan Semiconductor Manufacturing Company TSM is one of, if not the most important companies in the world, making it a nearly surefire long-term investment in artificial intelligence and technology in general.  

Taiwan Semi, or TSMC, physically manufactures the most cutting-edge semiconductors fueling the artificial intelligence boom and the wider tech-driven economy.

The chip builder reported a strong beat-and-raise Q3 on October 15, confirming that the AI capex spending spree remains full-steam ahead even as bubble concerns ramp up. The chart below showcases Taiwan Semi's impressive earnings expansion, including ~400% growth between 2019 and 2025.

TSMC’s Q4 earnings estimate surged ~12% since its mid-month release, while its FY27 estimate jumped significantly as well to help it earn a Zacks Rank #1 (Strong Buy).

Its robust guidance is supported by “continued strong demand” for its “leading-edge process technologies, including the steep ramp-up of our 2-nanometer technology.”

The stock, which nearly quadrupled the Tech sector over the last 15 years and tripled it over the past five, is down ~12% from its recent peaks.

TSMC is on the verge of a possible technical breakout, and it is trading at a 43% discount to its highs and in line with its 10-year median at 19.5X forward earnings.

TSMC: Is This the Best Tech Stock to Buy Now and Hold Forever?

AI and the global economy rely, directly or indirectly, on semiconductors. More importantly, TSMC likely manufactured a large share of the chips fueling the AI boom and beyond, since the chip builder reportedly captures 60% of the foundry market and 90% of advanced semiconductor manufacturing.

The company on a tiny island doesn’t design or sell its own semiconductors. Instead, TSMC was founded in the late 1980s on a simple, yet revolutionary “pure-play foundry” model, dedicated exclusively to manufacturing advanced semiconductors for other tech companies.

Taiwan Semi has built an almost unbreachable fortress around its leading-edge chip-building business by earning the trust of customers such as Nvidia (NVDA), Apple (AAPL), AMD, Qualcomm, and other tech titans.

Nvidia, Apple, and others rely on TSMC because of its unmatched scale and expertise. Plus, their CEOs know that Taiwan Semi is their partner, not a competitor. The company is also critically rushing to expand its global manufacturing operation outside of Taiwan into the U.S., Japan, and beyond to address one of its only potential shortfalls: geopolitics. 

What AI Bubble? Buy Taiwan Semi Stock for AI-Boosted Growth

Wall Street is still waiting for Amazon, Alphabet, Nvidia, and many other tech firms to report third-quarter earnings. But TSMC already confirmed that the AI capital spending boom is ramping up.

TSM grew its Q3 earnings by 58% on 41% higher revenue. The chip builder said that 3- nanometer shipments accounted for 33% of its total wafer revenue, up from 23% in the year-ago period. Plus, its most advanced 2-nm chips accounted for 8%, up from 3% in the second quarter (first time 2-nm shipments were broken out in its earnings release).

TSMC’s Q4 earnings estimate surged 12% since its Q3 release on October 15, with its fiscal 2027 estimate 6% higher. The recent positivity extends its impressive run of upward earnings revisions, and its most accurate estimates for FY26 and FY27 came in above consensus. The tech giant’s overall upbeat earnings revisions land it a Zacks Rank #1 (Strong Buy) right now.

The leading chip builder said at the start of 2026 that it expects to grow its revenue by a compound annual growth rate (CAGR) of ~25% between 2024 and 2029.

TSMC is projected to grow its revenue by 41% in 2026 and another 33% next year to reach $229 billion, adding more than $100 billion vs. 2025’s $122 billion total and more than tripling its 2023 figure.

Image Source: Zacks Investment Research

On the bottom line, it’s projected to grow its earnings by 60% in 2026 and 32% next year, more than doubling its 2025 total ($10.65) in the process ($22.44 a share in 2027). TSMC's robust guidance is supported by “continued strong demand” for its “leading-edge process technologies, including the steep ramp-up of our 2-nanometer technology.”

On top of that, Taiwan Semi has topped our quarterly earnings estimates for five years running.

Buy This Top-Ranked Tech Stock Now for Value and Breakout Potential?

Taiwan Semi stock soared ~3,300% in the last 15 years to blow away Tech’s ~870%. More recently, TSM stock outclimbed the entire Mag 7 over the last year, up ~44%.

The chip builder is nearly neck-and-neck with Nvidia over the last three years, skyrocketing ~400%, while leaving the rest of the Mag 7 in the dust.

TSM is down roughly 12% from its October 5 records, and its average Zacks price target implies 27% upside from Monday’s levels.

Some of its drop can be attributed to the laws of market gravity. The stock reached heavily overbought RSI levels to start October. TSM stock is attempting to retake its 50-day and its long-term 21-week moving averages.

The pullback, coupled with its strong earnings growth outlook, has TSMC trading at a 43% discount to its highs at 19.5X forward 12-month earnings.

The chip builder is also trading almost directly in line with the Tech sector, the S&P 500, and TSMC’s 10-year median, even though it has climbed ~1,300% in the past decade vs. the Zacks Tech sector’s ~470%.

On top of all that, TSMC’s balance sheet is robust and supports its various expansion efforts. And 16 of the 19 brokerage recommendations that Zacks has are “Strong Buys.”

Disclosure: Ben Rains owns TSM stock in his personal portfolio. 

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

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