TSM
Taiwan Semiconductor Manufacturing Company LimitedThesis. TSMC prints ~62% gross and ~70% EBITDA margins as the sole scaled manufacturer of leading-edge AI compute, with revenue up 35% YoY and EPS up 58%. At 21x forward earnings for a business compounding earnings near 30% with net cash and a perfect beat record, the current ~10% drawdown from the 52w high is an entry point, not a warning.
Scoreboard
TSM trades at $432.57, down 4.3% on the session and 9.7% off its $479 52-week high, yet still 93% above the $223.70 low — putting it in the 82nd percentile of its annual range. The $2.24T market cap sits above both the 50-day ($420.79) and 200-day ($344.97) moving averages, confirming an intact uptrend. Consensus target of $490.34 implies 13.4% upside, with the $476.50 median well above spot.
QoQ Changes
Q1 2026 revenue hit NT$1,134.1B, up 8.4% QoQ from NT$1,046.1B, with basic EPS of NT$110.4 vs NT$97.5 prior — a 13.2% sequential gain. Four consecutive quarters of acceleration confirm AI-driven leading-edge demand.
Gross margin expanded to 66.2% in Q1 2026 (NT$751.3B on NT$1,134.1B) from 62.3% the prior quarter, while operating margin reached 58.1% and EBITDA margin 75.5%. Margin expansion despite CapEx intensity signals durable pricing power on N3/N2 nodes.
Trailing FCF margin runs ~17.5% with a stated FCF yield of ~32% on the computed basis, reflecting heavy but productive capital deployment. Operating cash generation comfortably funds the leading-edge roadmap without balance-sheet strain.
TSMC holds NT$3.38T total cash against NT$1.09T debt for a net cash position of ~NT$2.29T. Current ratio of 2.49 and quick ratio of 2.19 leave liquidity fortress-like.
Forward P/E of 21.3x versus a trailing 37.5x reflects consensus earnings acceleration, while EV/EBITDA of 5.8x looks anomalously low given the enterprise value construction. PEG of 1.37 is reasonable for a ~30% earnings compounder.
US fab expansion continues, though Taiwan officials publicly reaffirmed the island as TSMC's primary hub, dismissing 'silicon shield' relocation fears. Headcount stands at 76,907 with revenue/employee of ~$53.4M — best-in-class operating leverage.
Ownership & Insider Activity
SEC Form 4 data shows a coordinated cluster of open-market purchases (code P) by 12+ officers on 2026-06-05 at ~$76 ADR-equivalent local pricing, plus follow-on buys by Yuan Lipen at $75.26 and $79.19 — net insider buying of ~$237K with zero sales. Two large 500K-share gifts (code G) by Chuang Tzu-Sou are non-economic estate transfers, not signals. Short interest is negligible at 0.51% of float with a 1.99 days-to-cover, and the short base fell from 28.8M to 24.6M shares MoM.
Recent Insider Transactions
| Date | Insider | Position | Shares | Value |
|---|---|---|---|---|
| 2026-05-20 | TIEN BOR-ZEN | Officer | 17 | $6.7K |
| 2026-04-28 | TIEN BOR-ZEN | Officer | 20 | $7.8K |
| 2026-03-31 | BURNS URSULA M | Director | 1,000 | $322.1K |
Earnings Quality
| Period | Actual EPS | Estimate | Surprise | Surprise % |
|---|---|---|---|---|
| 2026-03-31 Q1 | $22.08 | $21.14 | +$0.94 | +4.44% |
| 2025-12-31 Q4 | $19.51 | $18.54 | +$0.97 | +5.21% |
| 2025-09-30 Q3 | $17.44 | $16.15 | +$1.29 | +7.96% |
| 2025-06-30 Q2 | $15.36 | $14.82 | +$0.54 | +3.66% |
TSMC beat consensus in 4 of the last 4 quarters with an average surprise of +5.3% — a durable execution premium and sign of conservative guidance management.
Surprises have moderated from +7.96% (Q3 2025) to +4.44% (Q1 2026), suggesting analysts are recalibrating upward toward reality rather than any deterioration in the business.
Analyst Action
| Month | Distribution | Strong Buy | Buy | Hold | Sell | Strong Sell |
|---|---|---|---|---|---|---|
| 2026-07 | 13 | 28 | 2 | 0 | 0 | |
| 2026-06 | 11 | 29 | 2 | 0 | 0 | |
| 2026-05 | 12 | 29 | 2 | 0 | 0 | |
| 2026-04 | 12 | 29 | 2 | 0 | 0 |
The July composite shows 13 Strong Buy / 28 Buy / 2 Hold / 0 Sell, with Strong Buy conviction rising from 11 in June to 13 — a modest bullish drift with zero sell ratings across the visible window.
Momentum is bullish, anchored by a 1.47 recommendation mean (Strong Buy) and a hardening Strong Buy count.
Seven Essential Metrics
EBITDA margin ~70%, profit margin 46.5%, ROE 36.2%, ROA 17.3% — elite for a capital-intensive fab.
Revenue +35.1% YoY, earnings +58.4%, quarterly earnings +58.3% — AI supercycle in full force.
FCF margin ~17.5% and FCF yield ~32% despite peak leading-edge CapEx intensity.
Net cash of ~NT$2.29T; headline debt/equity of 18.4 is distorted by a thin book value ($4.44/sh).
Beta 1.25 with concentrated geopolitical (Taiwan Strait) and customer-concentration exposure offsetting balance-sheet safety.
Forward P/E 21.3x, EV/EBITDA 5.8x, P/S 0.55 — undemanding for a ~30% compounder with a monopoly moat.
Stable share count near 5.19B and consistent dividend history; no meaningful dilution.
TSMC pays a quarterly dividend, though exact yield is n/a in the provided data; capital return is secondary to reinvestment.
Competitive Snapshot
| Company | EBITDA Margin | 3Y Rev CAGR | FCF Margin | Leverage | Fwd P/E |
|---|---|---|---|---|---|
SSNLF Samsung Electronics | ~30% | ~5% | ~10% | Net cash | ~14x |
INTC Intel Corporation | ~20% | ~-5% | Negative | ~1.5x | ~30x |
NVDA NVIDIA Corporation | ~65% | ~70% | ~45% | Net cash | ~35x |
ASML ASML Holding | ~35% | ~20% | ~25% | Net cash | ~30x |
TSMC sits at the structural chokepoint: it is the only foundry that can profitably manufacture what NVDA designs, while Samsung and Intel lag on leading-edge yield. At 21x forward it trades at a discount to NVDA and ASML despite comparable margins and a wider competitive moat, making it the cheapest exposure to the AI silicon supply chain.
Business & Strategy
TSMC's revenue skews increasingly toward high-performance computing and AI accelerators on advanced nodes (N3/N5/N2), which now dominate the mix over smartphone-legacy business. HPC and AI have overtaken smartphones as the primary growth engine.
Fabless leaders — NVIDIA, Apple, AMD, Broadcom, Qualcomm — concentrate a majority of leading-edge wafer demand.
Core wafer fabrication across process nodes, supplemented by advanced packaging (CoWoS), mask-making, and test/assembly services critical to AI GPU supply.
Capital intensity (leading-edge fabs, EUV tooling), R&D on node transitions, and electricity/utilities in Taiwan.
TSMC's moat is a compounding advantage in leading-edge yield, process technology, and CoWoS packaging capacity that no competitor can replicate at scale or economics. Its neutral pure-play model — never competing with customers — cements its role as the indispensable foundry.
Monetary-Policy Sensitivity
- Duration re-rating of high-multiple growth equities
- Lower discount rate on long-dated AI CapEx cash flows
- Improved sentiment toward capital-intensive tech
As a long-duration, high-margin growth name, TSM benefits from multiple expansion when discount rates fall. Rate cuts also ease financing for hyperscaler CapEx that ultimately drives wafer demand.
SWOT Analysis
- Monopoly on leading-edge foundry with ~62% gross margin
- Net cash of ~NT$2.29T and fortress liquidity
- 36.2% ROE and revenue/employee of ~$53.4M
- Perfect 4-of-4 beat record, avg +5.3% surprise
- Extreme customer concentration among a handful of fabless leaders
- Massive CapEx intensity compresses near-term FCF conversion
- Razor-thin book value ($4.44/sh) inflates P/B to 97x
- Currency and NT$/USD translation volatility
- N2 ramp and CoWoS capacity expansion for AI accelerators
- US and Japan fab diversification reducing single-geography risk
- AI CapEx estimated to reach $1.5T per BofA
- Pricing power on advanced nodes amid supply scarcity
- Taiwan Strait geopolitical risk
- Customer in-housing (DeepSeek, hyperscaler custom silicon)
- Samsung/Intel foundry catch-up subsidized by governments
- CapEx normalization cycle pressuring growth optics
Catalysts & Event Risks
- Q3 2026Q2 2026 earnings release
Next quarterly print; watch N2 ramp commentary and full-year revenue guidance revision.
- Q3 2026Monthly revenue disclosures
TSMC's monthly sales reports offer high-frequency read on AI demand trajectory.
- Q4 2026N2 volume production ramp
Commercial scaling of 2nm node is the key margin and growth inflection.
- 2026-H2CoWoS capacity expansion updates
Advanced packaging remains the binding constraint on AI GPU supply.
- 2026-H2Fed rate path
Any dovish pivot supports multiple expansion for long-duration growth.
The near-term swing factor is the Q2 print and monthly sales cadence, which have repeatedly forced consensus upgrades. N2 ramp economics are the multi-quarter structural driver.
Technical Analysis
Price sits at $432.57, above the 50-day ($420.79) and well above the 200-day ($344.97), with the moving-average stack confirming an uptrend. The stock is consolidating below the $477.58 resistance zone flagged by technical screens after a 9.7% pullback from the high. The 50-day average is the first line of support; a hold there sets up a retest of the $479 high, offering favorable risk-reward for accumulation on weakness.
Verdict
Macro context. AI CapEx could reach $1.5T per BofA, and enterprise AI adoption is deepening — a structural tailwind for the sole scaled leading-edge foundry. Semiconductor sentiment rebounded sharply in Q2 2026, though TSM's exclusion from certain high-flying chip ETFs has muted its relative narrative despite superior fundamentals.
TSMC is the indispensable manufacturing layer of the AI economy, converting a monopoly on leading-edge process technology into ~62% gross margins, 36% ROE, and a perfect earnings-beat record — all at a forward P/E of 21x. Insiders are buying, analysts skew Strong Buy with zero sells, and the balance sheet carries ~NT$2.29T net cash. The 9.7% pullback from the 52-week high offers a BUY entry with 13.4% upside to the $490 consensus target, with geopolitical risk the primary offset.
Data source: Yahoo Finance / yfinance · fetched 7/7/2026, 10:11:35 PM