TSMC Stock Soars After Record Earnings: Is It Still a Buy?

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Taiwan Semiconductor Manufacturing Company (TSMC) has once again proven why it sits at the heart of the global technology ecosystem.

The chipmaking giant has shattered records with a 39% year-on-year profit surge, buoyed by insatiable demand for artificial intelligence (AI) chips.

As investors cheer and the stock rallies to new highs, the key question emerges: is TSMC still a buy, or has the market already priced in its AI-driven success?

Record-Breaking Quarter Signals Unstoppable Momentum

In its latest financial report, TSMC posted a net profit of NT$452.3 billion (approximately US$14.8 billion) for the third quarter of 2025 — a 39.1% increase from the previous year, beating analysts’ expectations.

Revenues rose sharply on the back of relentless global demand for AI and high-performance computing (HPC) semiconductors.

This marks the sixth consecutive quarter of double-digit growth, underscoring the company’s unmatched dominance in advanced chip manufacturing. Analysts had expected a profit closer to NT$417 billion, meaning the firm didn’t just meet forecasts — it crushed them.

The market’s response was immediate. TSMC’s U.S.-listed American Depositary Receipts (ADRs) soared, trading at their highest premium in two decades compared to the company’s Taiwan shares, as global investors rushed to gain exposure to what many call the backbone of the AI revolution.

The AI Megatrend Driving TSMC’s Growth

The semiconductor industry has entered a golden age powered by the explosion of artificial intelligence. Every AI model, data center, and cloud platform depends on high-performance chips — and TSMC manufactures most of them.

The company’s leading-edge 3 nm and 5 nm process technologies have become the standard for industry leaders like Nvidia, Apple, AMD, and Qualcomm.

With its upcoming 2 nm node already in development, TSMC continues to maintain a formidable technological lead, ensuring strong pricing power and customer loyalty.

The demand for AI servers and training chips is also creating a ripple effect across the tech landscape. As corporations race to expand computing capacity, TSMC’s order book remains packed.

Analysts estimate that AI-related chips now account for nearly 20% of TSMC’s total revenue, a figure expected to grow sharply over the next two years.

Strategic Expansion Beyond Taiwan

While Taiwan remains TSMC’s core manufacturing hub, the company is aggressively diversifying its footprint.

It is investing tens of billions of dollars in new fabrication plants in the United States, Japan, and Europe to meet global demand and reduce geopolitical risk.

The flagship Arizona fab project, set to produce advanced 3 nm chips by 2026, underscores TSMC’s ambition to secure a long-term role in Western semiconductor supply chains.

This expansion not only strengthens partnerships with U.S. tech firms but also aligns TSMC with government-backed initiatives like the U.S. CHIPS and Science Act.

Such moves are also strategic hedges against potential disruptions arising from U.S.–China tensions, ensuring continuity of production and access to major markets.

A Look at the Numbers — And the Valuation Debate

TSMC’s financial performance has been spectacular, but valuation is where investors start to diverge.

• Stock Price: Around $305 (ADR) as of mid-October 2025, near its all-time high.

• Market Capitalization: Over US$700 billion, making it Asia’s most valuable listed company.

• Price-to-Earnings (P/E) Ratio: Roughly 30x, elevated but not excessive given its earnings growth rate.

• Analyst Consensus: “Strong Buy,” with an average 12-month target of $333, implying a modest 10% upside.

While the numbers look healthy, some market observers caution that much of the AI optimism may already be priced in. If growth slows or geopolitical risks intensify, TSMC’s lofty valuation could come under pressure.

Risks Investors Shouldn’t Ignore

Despite its strong fundamentals, TSMC is not immune to external pressures. Investors considering an entry or holding position should weigh the following risks:

1. Geopolitical Tension: Taiwan’s delicate political position and ongoing U.S.–China competition over semiconductor dominance remain major wildcards.

2. Cyclical Semiconductor Demand: Chip demand can fluctuate sharply depending on global economic cycles and consumer spending.

3. Currency Risk: As a global exporter, TSMC’s profitability can be affected by exchange rate volatility, especially between the U.S. dollar and the New Taiwan Dollar.

4. Execution Challenges: Building and scaling new fabs is costly and complex. Any production delays or yield issues could dent profitability.

5. Valuation Risk: With shares near record highs, any earnings miss or macro shock could trigger a sharp correction.

So, Is TSMC Still a Buy?

From a long-term perspective, TSMC remains a foundational player in the AI and semiconductor ecosystems.

Its advanced manufacturing technology, diversified customer base, and global expansion strategy position it well to capture continued growth over the next decade.

However, the stock’s recent rally means new investors should be strategic. A phased buying approach — adding on market dips or during periods of consolidation — may offer better entry points. F

or long-term growth investors who believe in the secular AI trend, TSMC remains a compelling choice. For short-term traders, the risk-reward balance looks tighter.

The Bottom Line

TSMC’s record-breaking 39% profit surge reinforces its role as the engine behind the AI economy.

Its technology leadership, robust earnings, and expanding global reach make it one of the most resilient and strategically vital companies in the world.

Still, with the stock at historic highs and the market’s expectations sky-high, prudence is warranted. Investors should view TSMC as a core long-term growth holding, but not chase short-term euphoria.

In essence, TSMC is still a buy — but a disciplined one.

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