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AI Boom Fuels Taiwan Semiconductor's Growth: Will It Sustain Momentum?
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Key Takeaways
Taiwan Semiconductor's Q3 revenues climbed 40.8% to $33.1B, with EPS rising 39% to $2.92.
Strong AI chip demand boosted 3nm and 5nm orders, making up most wafer revenues.
TSMC is investing $165B in new U.S. fabs and expanding in Germany, Japan and Taiwan to meet AI chip demand.
Taiwan Semiconductor Manufacturing Company (TSM - Free Report) , also known as TSMC, continues to benefit from the global surge in demand for artificial intelligence (AI) chips. In the third quarter of 2025, the company’s revenues jumped 40.8% year over year to $33.1 billion, while earnings per share (EPS) soared 39% to $2.92. The robust growth was primarily driven by increased orders for 3nm and 5nm chips, which are used in AI servers and high-performance computing applications.
Taiwan Semiconductor’s CEO, C.C. Wei, noted that AI-related demand has surpassed expectations as customers and their clients are requesting additional production capacity. The company’s 7nm and below advanced nodes accounted for nearly three-fourths of total wafer revenues during the third quarter.
To meet the growing demand for AI and advanced computing chips, TSMC is expanding its fabrication facilities across different countries. In the United States alone, Taiwan Semiconductor is investing $165 billion to build five new state-of-the-art fabrication facilities and two advanced packaging facilities in Arizona. These facilities will boost the U.S. semiconductor supply chain for chips used in AI and high-performance computing. Apart from this, it is expanding fabrication facilities across Germany, Japan and Taiwan.
This global expansion reflects Taiwan Semiconductor’s response to customer demand for geographic flexibility and government incentives. By locating capacity closer to key clients and end markets, the company strengthens its role as a critical supplier in the semiconductor supply chain.
We believe that TSMC’s global fab expansion push will help it capitalize on the growing opportunities from rising AI-related chip demand. Taiwan Semiconductor expects full-year 2025 revenue growth in the mid-30% range. The Zacks Consensus Estimate indicates that 2025 revenues will surge 33.7% to $120.47 billion.
TSMC’s Competitors in the AI Chip Making Race
Intel (INTC - Free Report) and GlobalFoundries (GFS - Free Report) are also expanding their presence in AI chip manufacturing.
Intel is investing heavily in its foundry business, aiming to produce advanced chips. The company is currently focusing on its 18A process, which signifies 1.8nm chips. Intel’s 18A process is claimed to have higher performance and efficiency, which will help the company better compete with Taiwan Semiconductor’s upcoming N2 chips.
GlobalFoundries focuses more on mature nodes. However, the company is witnessing some AI-related demand, especially in edge computing and embedded AI. GlobalFoundries is working to expand capacity in the United States and Europe to attract customers looking for supply-chain flexibility.
TSM’s Share Price Performance, Valuation and Estimates
Shares of Taiwan Semiconductor have risen around 47.5% year to date compared with the Zacks Computer and Technology sector’s gain of 26.9%.
Taiwan Semiconductor YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, TSM trades at a forward price-to-earnings ratio of 24.19, lower than the sector’s average of 29.2.
Taiwan Semiconductor Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Taiwan Semiconductor’s 2025 and 2026 earnings implies a year-over-year increase of 44.9% and 20.4%, respectively. Estimates for 2025 and 2026 have been revised upward in the past 30 days.
Image: Bigstock
AI Boom Fuels Taiwan Semiconductor's Growth: Will It Sustain Momentum?
Key Takeaways
Taiwan Semiconductor Manufacturing Company (TSM - Free Report) , also known as TSMC, continues to benefit from the global surge in demand for artificial intelligence (AI) chips. In the third quarter of 2025, the company’s revenues jumped 40.8% year over year to $33.1 billion, while earnings per share (EPS) soared 39% to $2.92. The robust growth was primarily driven by increased orders for 3nm and 5nm chips, which are used in AI servers and high-performance computing applications.
Taiwan Semiconductor’s CEO, C.C. Wei, noted that AI-related demand has surpassed expectations as customers and their clients are requesting additional production capacity. The company’s 7nm and below advanced nodes accounted for nearly three-fourths of total wafer revenues during the third quarter.
To meet the growing demand for AI and advanced computing chips, TSMC is expanding its fabrication facilities across different countries. In the United States alone, Taiwan Semiconductor is investing $165 billion to build five new state-of-the-art fabrication facilities and two advanced packaging facilities in Arizona. These facilities will boost the U.S. semiconductor supply chain for chips used in AI and high-performance computing. Apart from this, it is expanding fabrication facilities across Germany, Japan and Taiwan.
This global expansion reflects Taiwan Semiconductor’s response to customer demand for geographic flexibility and government incentives. By locating capacity closer to key clients and end markets, the company strengthens its role as a critical supplier in the semiconductor supply chain.
We believe that TSMC’s global fab expansion push will help it capitalize on the growing opportunities from rising AI-related chip demand. Taiwan Semiconductor expects full-year 2025 revenue growth in the mid-30% range. The Zacks Consensus Estimate indicates that 2025 revenues will surge 33.7% to $120.47 billion.
TSMC’s Competitors in the AI Chip Making Race
Intel (INTC - Free Report) and GlobalFoundries (GFS - Free Report) are also expanding their presence in AI chip manufacturing.
Intel is investing heavily in its foundry business, aiming to produce advanced chips. The company is currently focusing on its 18A process, which signifies 1.8nm chips. Intel’s 18A process is claimed to have higher performance and efficiency, which will help the company better compete with Taiwan Semiconductor’s upcoming N2 chips.
GlobalFoundries focuses more on mature nodes. However, the company is witnessing some AI-related demand, especially in edge computing and embedded AI. GlobalFoundries is working to expand capacity in the United States and Europe to attract customers looking for supply-chain flexibility.
TSM’s Share Price Performance, Valuation and Estimates
Shares of Taiwan Semiconductor have risen around 47.5% year to date compared with the Zacks Computer and Technology sector’s gain of 26.9%.
Taiwan Semiconductor YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, TSM trades at a forward price-to-earnings ratio of 24.19, lower than the sector’s average of 29.2.
Taiwan Semiconductor Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Taiwan Semiconductor’s 2025 and 2026 earnings implies a year-over-year increase of 44.9% and 20.4%, respectively. Estimates for 2025 and 2026 have been revised upward in the past 30 days.
Image Source: Zacks Investment Research
Taiwan Semiconductor currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.