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TSM's AI Boom Continues: Will It Drive Above 30% Sales Growth in FY26?
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Key Takeaways
TSMC reported Q1 revenues of $35.9B, up 40.6% YoY, led by demand for advanced chips in AI workloads.
High-performance computing accounted for 61% of sales, with advanced nodes making up most wafer revenues.
TSMC is expanding fabs globally, including a major U.S. investment, to meet rising AI chip demand.
Taiwan Semiconductor Manufacturing Company (TSM - Free Report) , also known as TSMC, is riding on a powerful AI-driven growth wave, and the latest quarterly results indicate that sales could rise above 30% in 2026. The company’s strength lies in its dominance in advanced chip manufacturing, which is seeing massive demand from artificial intelligence (AI) and high-performance computing applications.
In the first quarter of 2026, TSMC’s revenues rose 40.6% year over year to $35.9 billion, driven by strong adoption of leading-edge nodes. High-performance computing emerged as the biggest growth engine, contributing 61% of total revenues and growing 20% sequentially. Advanced technologies, including 3nm and 5nm, made up nearly three-fourths of wafer sales, highlighting how AI workloads are creating strong demand for cutting-edge chips.
Taiwan Semiconductor expects 2026 revenues to grow above 30%, driven by continued strength in AI-related demand. This optimism is reinforced by strong second-quarter revenue guidance of $39-$40.2 billion, implying continued year-over-year growth of more than 30%.
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 and meet its 2026 revenue growth target of above 30%. The Zacks Consensus Estimate for TSMC’s 2026 revenues is pegged at $160.67 billion, indicating a year-over-year increase of 31.2%.
TSMC’s Rivals in AI Chip Making Race
Intel Corporation (INTC - Free Report) and GlobalFoundries Inc. (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. 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 surged around 133.2% over the past year compared with the Zacks Computer and Technology sector’s appreciation of 57%.
From a valuation standpoint, TSMC trades at a forward price-to-earnings ratio of 23.38, slightly lower than the sector’s average of 24.96.
Taiwan Semiconductor Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Taiwan Semiconductor’s 2026 and 2027 earnings implies a year-over-year increase of 41.1% and 24.2%, respectively. The consensus mark for 2026 and 2027 earnings has been revised upward over the past seven days.
View the Zacks #1 Rank List
Image: Bigstock
TSM's AI Boom Continues: Will It Drive Above 30% Sales Growth in FY26?
Key Takeaways
Taiwan Semiconductor Manufacturing Company (TSM - Free Report) , also known as TSMC, is riding on a powerful AI-driven growth wave, and the latest quarterly results indicate that sales could rise above 30% in 2026. The company’s strength lies in its dominance in advanced chip manufacturing, which is seeing massive demand from artificial intelligence (AI) and high-performance computing applications.
In the first quarter of 2026, TSMC’s revenues rose 40.6% year over year to $35.9 billion, driven by strong adoption of leading-edge nodes. High-performance computing emerged as the biggest growth engine, contributing 61% of total revenues and growing 20% sequentially. Advanced technologies, including 3nm and 5nm, made up nearly three-fourths of wafer sales, highlighting how AI workloads are creating strong demand for cutting-edge chips.
Taiwan Semiconductor expects 2026 revenues to grow above 30%, driven by continued strength in AI-related demand. This optimism is reinforced by strong second-quarter revenue guidance of $39-$40.2 billion, implying continued year-over-year growth of more than 30%.
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 and meet its 2026 revenue growth target of above 30%. The Zacks Consensus Estimate for TSMC’s 2026 revenues is pegged at $160.67 billion, indicating a year-over-year increase of 31.2%.
TSMC’s Rivals in AI Chip Making Race
Intel Corporation (INTC - Free Report) and GlobalFoundries Inc. (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. 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 surged around 133.2% over the past year compared with the Zacks Computer and Technology sector’s appreciation of 57%.
Taiwan Semiconductor One-Year Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, TSMC trades at a forward price-to-earnings ratio of 23.38, slightly lower than the sector’s average of 24.96.
Taiwan Semiconductor Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Taiwan Semiconductor’s 2026 and 2027 earnings implies a year-over-year increase of 41.1% and 24.2%, respectively. The consensus mark for 2026 and 2027 earnings has been revised upward over the past seven 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.