Talk of an AI bubble has been on the rise among mainstream media and some executive commentary. This is a natural reaction to upward – parabolic – price movement in the technology sector, especially in names involved in chip and semiconductor production. However, amid the hype, there is one name that stands out as a disciplined and strategic way to keep up with this trend.
Semiconductor manufacturing in Taiwan today
Taiwan Semiconductor Manufacturing Co., Ltd
- 52 week range
- $134.25
▼
$311.37
- Dividend yield
- 0.88%
- P/E ratio
- 30.29
- Price target
- $371.67
After announcing better-than-expected quarterly earnings on October 16, Taiwan Semiconductor Manufacturing Co., Ltd New York Stock Exchange: TSM The stock started the trading day up 0.5%.
But the real story lies under the hood: Even with Wall Street’s expectations already high, Taiwan Semiconductor Company managed to beat the Street, underscoring the strength of its business and its essential role in fueling the AI revolution.
Crushing the Numbers: Taiwan’s Semiconductor Growth Engine
Double-digit percentage growth rates are typically seen in small companies. So when a $1.2 trillion company posts a Revenue growth of 40.8% Over the past year, it’s a different story.
This jump in revenue reveals several key takeaways for potential or existing Taiwan Semiconductor shareholders. First, pricing power remains intact despite recent geopolitical tensions in this area, particularly uncertainty over tariffs as the US aims to strengthen its footprint and capacity in semiconductor manufacturing.
Second, TSM’s near-monopoly position has accelerated its strong position in the industry. Management estimated that gross profit margins would range between 55.5% and 57.5%, but they ended up reporting a much higher percentage of 59.5%.
This ability to outperform and expand their margins will translate directly into gains for shareholders, including higher net income margins and earnings per share (EPS), ultimately leading to stronger valuations. It is worth noting that the company’s net income margin increased from 42.8% in the same quarter last year to 45.7% in this quarter.
Given its current position, Taiwan Semiconductor has open scope to reallocate these profits to further expansion and efficiency, as evidenced by its return on equity (ROE) metric of 37.8%, which is higher than most other peers in the industry. For comparison, Advanced Micro Devices Company Nasdaq: AMD It achieved a return on shareholders’ equity of 4.7%.
The best part? These numbers are expected to improve, as management has now guided gross margins to between 59% and 61% for Q4 2025. This stacks up directly with net EPS and ROE, boosting the company’s valuation.
Analysts raise the bar after explosive quarter
TSM’s muted post-earnings rally may seem disappointing at first, but the broader macro environment helps explain the reaction. The United States is still grappling with a potential government shutdown, and tensions remain high with China, especially regarding rare earth exports.
However, not everyone on Wall Street is erring on the side of caution. Analysts gave TSM a consensus price target of $363.33, implying a 20.4% upside from today’s price (not to mention a new all-time high).
One of the analysts Susquehanna’s Mehdi Hosseini believes the stock has 32.5% upside potential, as evidenced by an increase in the price target from $300 to $400.
TSM offers a compelling mix of momentum and stability for investors looking to capitalize on AI and chip growth without the wild volatility of smaller names. The low level of volatility, coupled with strong fundamentals and rising analyst targets, makes it one of the few AI-related stocks that can still enjoy significant upside without the downside risk of its newer, less established peers.
Before you consider semiconductor manufacturing in Taiwan, you’ll want to hear this.
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While the Taiwanese semiconductor maker currently has a Moderate Buy rating among analysts, top-rated analysts believe these 5 stocks are better buys.
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