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Buy the Surge in Taiwan Semiconductor Stock as Q3 Results Approach?
Recently hitting an all-time high of over $300 a share, investors will be closely watching Taiwan Semiconductor’s (TSM - Free Report) stock this week, with the technology giant set to report its Q3 results on Thursday, October 16.
Riding a wave of unprecedented demand for next-generation artificial intelligence chips, Taiwan Semiconductor is experiencing record growth.
Correlating with such, TSM shares are up +50% in 2025 and have now soared nearly +400% in the last three years.
Image Source: Zacks Investment Research
Surging AI Chip Demand
As the world’s largest pure-play circuit foundry provider, Taiwan Semiconductor has been instrumental in manufacturing many of the most advanced AI chips, which are being built using its cutting-edge 3nm and 5nm nodes.
In this context, Taiwan Semiconductor provides the manufacturing process technology to build chips using its fabrication plants for clients who create the intellectual property (IP), architecture, and functionality of the chip. In other words, the chip is the car, and the node is the factory and tools used to build the car.
At the forefront of major companies using Taiwan Semiconductor’s nodes is its largest customer, Apple (AAPL - Free Report) . Apple is utilizing Taiwan Semiconductor’s nodes for its M-series chips, which power MacBooks, iPads, and enhanced intelligence features in iPhones.
Based on Zacks' estimates, Taiwan Semiconductor’s Q3 sales are thought to have surged 34% to a record $31.5 billion compared to $23.5 billion in the prior year quarter. On the bottom line, Q3 EPS is expected to spike 33% to record peaks of $2.59 versus $1.94 per share a year ago.
Notably, Taiwan Semiconductor has surpassed sales estimates for nine straight quarters and has exceeded earnings expectations for 19 consecutive quarters. Over the last four quarters, Taiwan Semiconductor has posted an average sales and earnings surprise of 1.58% and 5.96% respectively.
Image Source: Zacks Investment Research
TSM Valuation Comparison
At current levels, TSM shares trade at 31X forward earnings, which isn’t an overly stretched premium to the benchmark S&P 500’s 25X. This is also roughly on par with Apple and Marvell Technology’s P/E valuation and nicely beneath all of its other aforementioned big tech peers outside of Qualcomm’s 13X.
In terms of price-to-forward-sales, TSM does trade at a noticeable premium of 14X, which is only beneath Nvidia’s 27X. That said, the rest of its high-growth tech clients are trading above the S&P 500’s forward P/S ratio of 5X as well.
Image Source: Zacks Investment Research
Bottom Line
Following such an exhilarating YTD rally, Taiwan Semiconductor stock currently lands a Zacks Rank #3 (Hold). The ability to reach or exceed Q3 expectations and offer positive guidance will be more important than ever, given that Taiwan Semiconductor is projected to post record top and bottom line peaks in fiscal 2025 and FY26.
One thing is for sure, Taiwan Semiconductor stock has remained a very viable investment to keep in the portfolio, with its nodes being crucial to the AI ecosystem.
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Buy the Surge in Taiwan Semiconductor Stock as Q3 Results Approach?
Recently hitting an all-time high of over $300 a share, investors will be closely watching Taiwan Semiconductor’s (TSM - Free Report) stock this week, with the technology giant set to report its Q3 results on Thursday, October 16.
Riding a wave of unprecedented demand for next-generation artificial intelligence chips, Taiwan Semiconductor is experiencing record growth.
Correlating with such, TSM shares are up +50% in 2025 and have now soared nearly +400% in the last three years.
Image Source: Zacks Investment Research
Surging AI Chip Demand
As the world’s largest pure-play circuit foundry provider, Taiwan Semiconductor has been instrumental in manufacturing many of the most advanced AI chips, which are being built using its cutting-edge 3nm and 5nm nodes.
In this context, Taiwan Semiconductor provides the manufacturing process technology to build chips using its fabrication plants for clients who create the intellectual property (IP), architecture, and functionality of the chip. In other words, the chip is the car, and the node is the factory and tools used to build the car.
At the forefront of major companies using Taiwan Semiconductor’s nodes is its largest customer, Apple (AAPL - Free Report) . Apple is utilizing Taiwan Semiconductor’s nodes for its M-series chips, which power MacBooks, iPads, and enhanced intelligence features in iPhones.
Furthermore, Nvidia (NVDA - Free Report) , AMD (AMD - Free Report) , and Broadcom (AVGO - Free Report) are all relying on Taiwan Semiconductor to build many of their high-performance AI chips, along with Qualcomm (QCOM - Free Report) and Marvell Technology (MRVL - Free Report) .
Record Q3 Expectations
Based on Zacks' estimates, Taiwan Semiconductor’s Q3 sales are thought to have surged 34% to a record $31.5 billion compared to $23.5 billion in the prior year quarter. On the bottom line, Q3 EPS is expected to spike 33% to record peaks of $2.59 versus $1.94 per share a year ago.
Notably, Taiwan Semiconductor has surpassed sales estimates for nine straight quarters and has exceeded earnings expectations for 19 consecutive quarters. Over the last four quarters, Taiwan Semiconductor has posted an average sales and earnings surprise of 1.58% and 5.96% respectively.
Image Source: Zacks Investment Research
TSM Valuation Comparison
At current levels, TSM shares trade at 31X forward earnings, which isn’t an overly stretched premium to the benchmark S&P 500’s 25X. This is also roughly on par with Apple and Marvell Technology’s P/E valuation and nicely beneath all of its other aforementioned big tech peers outside of Qualcomm’s 13X.
In terms of price-to-forward-sales, TSM does trade at a noticeable premium of 14X, which is only beneath Nvidia’s 27X. That said, the rest of its high-growth tech clients are trading above the S&P 500’s forward P/S ratio of 5X as well.
Image Source: Zacks Investment Research
Bottom Line
Following such an exhilarating YTD rally, Taiwan Semiconductor stock currently lands a Zacks Rank #3 (Hold). The ability to reach or exceed Q3 expectations and offer positive guidance will be more important than ever, given that Taiwan Semiconductor is projected to post record top and bottom line peaks in fiscal 2025 and FY26.
One thing is for sure, Taiwan Semiconductor stock has remained a very viable investment to keep in the portfolio, with its nodes being crucial to the AI ecosystem.