Taiwan Semiconductor (TSM) Stock: Climbs on Strong AI Chip Demand and Earnings Growth

TLDRs:

TSMC shares rise on robust AI processor demand and consistent quarterly earnings growth. Analyst upgrades push TSMC stock higher with price target now at $295. TSMC captures 70% of the global foundry market, highlighting its dominance. Pure-play foundry model enables TSMC to outperform integrated competitors like Samsung and Intel.

Taiwan Semiconductor Manufacturing Company Limited (TSM) saw its shares climb after CFRA Research analyst Hazim Bahari upgraded the stock from hold to buy on Tuesday.

The upgrade came alongside a price-target increase for TSMC’s U.S. shares, raised from $240 to $295. In morning trading, TSMC stock broke out of a flat base at a buy point of 248.28, with a 5% buy zone extending to 260.69, according to IBD MarketSurge charts. By market close, shares had gained 1.51% to $250.92 and later 0.97% to $253.36.

Bahari highlighted the company’s strong fundamentals, pointing to TSMC’s accelerated production of cutting-edge AI processors for clients such as Nvidia, AMD, and Broadcom. The analyst noted that these factors underpin the company’s growth outlook and justify the bullish rating.

Taiwan Semiconductor Manufacturing Company Limited (TSM)

Sales and Earnings Continue Uptrend

TSMC’s latest financial performance underscores its accelerating growth trajectory. Over the last three quarters, sales increased 30%, 36%, and 54% year-over-year, while earnings per share jumped 47%, 54%, and 79% over the same period.

Analysts polled by FactSet project the current quarter’s earnings at $2.60 per share, representing a 34% increase, on estimated sales of $32 billion, up 36%.

This consistent upward trend in both revenue and profitability has reinforced investor confidence in TSMC’s long-term growth potential, especially as demand for AI chips continues to surge globally.

Dominance in Global Foundry Market

According to TrendForce, TSMC’s share of the global pure-play wafer foundry market reached 70.2% in Q2 2025. The company posted $30.2 billion in quarterly sales, an 18.5% increase from Q1, driven largely by AI chip demand and new smartphone launches.

Competitors lag far behind, with Samsung Foundry holding just 7.3% of the market and SMIC at 5.1%. The top 10 contract chipmakers collectively control 97% of global foundry revenue, indicating extreme market concentration.

TSMC’s rise from 67.6% to 70.2% in market share within a single quarter highlights the company’s growing dominance. Analysts note that the massive capital required for advanced semiconductor manufacturing favors large, specialized players, allowing TSMC to consolidate its leadership while competitors struggle to scale.

Pure-Play Foundry Model Drives Success

A key factor in TSMC’s success is its pure-play foundry model, established in 1987. By focusing exclusively on manufacturing chips designed by other companies, TSMC avoids conflicts of interest and attracts high-profile clients like Apple and Nvidia. This model contrasts with integrated manufacturers, such as Samsung and Intel, which face challenges competing with their own foundry clients.

The strategy has translated into a $1.262 trillion market capitalization, making TSMC the ninth most valuable company in the world. Its specialization in foundry services, combined with technological leadership, allows TSMC to capture a dominant market share while maintaining impressive profitability and scalability.

Looking Ahead

Investors and analysts are bullish on TSMC’s near-term prospects, driven by robust AI chip demand, growing smartphone orders, and the company’s unique pure-play model.

As the semiconductor industry consolidates around a few dominant foundries, TSMC appears well-positioned to continue its leadership and generate long-term shareholder value.

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