Key Takeaways
- Taiwan Semiconductor Manufacturing (TSM) has gained 41% over the past year, closing at $398.73 on November 13, but remains 18% below its 52-week high.
- Micron Technology (MU) has benefited from higher memory prices, although rising component costs are creating challenges for some of TSMC’s customers.
- TSMC’s third-quarter revenue increased 41.2% to $46.72 billion, while October sales jumped 59.7%, reflecting continued demand for advanced semiconductor manufacturing.
- TIKR estimates project normalized EPS rising approximately 120% from 2025 to 2027, but heavy capital spending and management’s cautious outlook remain key risks.
What Happened?
Taiwan Semiconductor Manufacturing (TSM) has gained 41% over the past year as AI infrastructure spending continues to drive demand for advanced chips.
However, shares closed at $398.73 on November 13, approximately 18% below their October high of $487.47.
On November 5, TSMC shares fell nearly 11% amid broader semiconductor selling, as investors weighed concerns about AI investment, rising memory prices, and changing expansion plans across the chip industry.
Micron Technology (MU) has benefited from tight memory supplies, but higher component prices are also putting pressure on manufacturers serving price-sensitive markets.
During TSMC’s October 15 earnings call, CEO C.C. Wei acknowledged these challenges, saying the company was “being prudent in our business planning going into 2027.”
Despite the volatility, TSMC’s financial performance remains strong.
According to its third-quarter earnings release, revenue increased 41.2% year over year in U.S. dollars to $46.72 billion, while net income climbed 68.7%. Its 2-nanometer technology accounted for 8% of wafer revenue.
The company’s October revenue report showed sales rising 59.7% year over year to NT$586.89 billion, while management raised its 2026 revenue growth outlook to approximately 44%, up from nearly 30% in January.
According to TIKR estimates, normalized EPS could increase approximately 120% from $10.65 in 2025 to $23.39 in 2027.
Analysts also raised their 2027 EPS estimates by approximately 16% since late June, suggesting improving expectations for future profitability.
Is TSMC Stock Undervalued or Overvalued?
TSMC appears reasonably valued, with potential upside if its projected earnings growth materializes, although heavy capital spending remains a significant risk.
TIKR’s November 10 chart showed the stock trading at approximately 16x forward earnings, compared with its five-year average of 18.2x.
That historical discount suggests potential upside if earnings continue rising, although investors should assess the multiple using the latest estimates and share price.
TSMC expects capital expenditures of $60 billion to $64 billion in 2026, up from approximately $40.9 billion in 2025.
Its board also approved approximately $40.93 billion in capital appropriations on November 10, supporting manufacturing expansion, advanced packaging, and future technology development. The authorization is not automatically additional to annual spending guidance.
Operating cash flow exceeded capital expenditures annually from 2021 through 2025, demonstrating TSMC’s ability to fund substantial investments internally.
Still, TSMC experienced a 4.5% revenue decline in 2023 following elevated capital spending in 2022, highlighting the semiconductor industry’s cyclical nature.
Over the next 12 months, AI accelerator demand, greater adoption of 2-nanometer technology, and advanced packaging expansion could support further earnings growth.
However, weaker customer spending, rising manufacturing costs, or lower capacity utilization could pressure profitability.
Overall, it does not appear too late to consider TSMC, but further upside depends on whether earnings growth can justify its substantial spending commitments and valuation.
Its fourth-quarter earnings report and initial 2027 outlook, expected in January, will provide an important test of whether demand can sustain its expansion plans.
So what is TSMC stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
