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Taiwan Semiconductor Retains 73% Foundry Share: Is the Stock a Buy?
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Key Takeaways
TSMC held a 73% foundry share for the second straight quarter as AI demand boosted revenues.
TSMC is expanding N3 capacity globally and adding $100 billion in Arizona investment for N2 and below.
TSMC sees strong interest in A14, with pre-production set for 2027 and volume production in 2028.
The pure-play foundry sector continued to benefit from the surge in artificial intelligence (AI)-related demand in the second quarter of 2026, with revenues rising 29% year over year, according to Counterpoint Research. Capacity reallocation remained a major cause of supply-demand imbalances across both advanced and mature nodes. Taiwan Semiconductor Manufacturing Company (TSM - Free Report) , or TSMC, maintained its dominant position, capturing 73% market share for the second consecutive quarter. This is supported by the company’s mass production of 2-nanometer (N2) chips, the ramp-up of 3-nanometer (N3) production, tight supply across 8-inch and 12-inch mature nodes and advanced packaging.
Reflecting this momentum, TSM stock has risen 41.1%, far outpacing the sector’s 17.9% growth and the S&P 500 composite’s 12% return.
Image Source: Zacks Investment Research
TSMC remains far ahead of the other pure-play foundries. United Microelectronics Corp. (UMC - Free Report) held a 4% share of the market in the first half of 2026, matching its performance from the third and fourth quarters of 2025. Just below UMC, GlobalFoundries (GFS - Free Report) maintained a 4% market share throughout 2025, before edging down to 3% in the first half of 2026.
Factors Supporting TSMC
The company’s near-term outlook is being shaped by sustained strong demand for its leading-edge process technologies. The AI boom continues to drive demand for greater computing power, supporting strong demand for leading-edge silicon. Management said its customers and their customers, particularly cloud service providers, continue to provide strong demand signals, keeping its confidence in the multi-year AI trend high.
The rise of agentic AI is bringing CPUs back into a more prominent role in AI data centers, adding to silicon demand beyond AI accelerators. TSMC expects to benefit from this trend, regardless of whether customers use x86, Arm-based or RISC-V architectures. The company is already working with its CPU customers to provide the advanced technologies and capacity needed to pursue opportunities in agentic AI.
TSMC is also stepping up its capital spending, which management says is correlated with higher growth opportunities in the following years. The company is building 13 leading-edge and advanced packaging fabs in Taiwan and plans to continue investing in the country. It also announced an additional $100 billion investment in Arizona for wafer fabs supporting N2 and below technologies, along with advanced packaging facilities, to meet strong multiyear demand from its leading U.S. customers.
Execution also continues for TSMC’s global plan to add three additional N3 fabs — one each in Taiwan, Arizona and Japan to support the robust multiyear pipeline of demand. The company is also converting 5-nanometer (N5) tools in Taiwan to support N3 capacity while optimizing capacity across nodes, including flexible support among N7, N5 and N3.
TSMC’s A14 technology is progressing as planned, with pre-production set for 2027 and volume production in 2028. Compared with N2, A14 is expected to deliver 10% to 15% higher performance at the same power or 25% to 30% lower power at the same speed, along with nearly 20% higher chip density. The company is observing a strong level of customer interest and engagement from both smartphone and High-Performance Computing AI applications, with customer tape-out activity already underway and ahead of schedule.
Technical indicators also signal a sustained bullish trend, as TSMC currently trades above its 50- and 200-day simple moving averages.
Image Source: Zacks Investment Research
TSMC’s Valuation
Based on the forward 12-month Price/Earnings (P/E), TSM trades at 21.84X compared with its median of 24.39X. The stock also stays cheaper than GlobalFoundries, which trades at a P/E of 23.43X compared with the 29.03X median.
Image Source: Zacks Investment Research
Meanwhile, United Microelectronics sits with a P/E of 18.20X, a discount relative to TSMC, though still at a premium to its own median of 16.92X.
Image Source: Zacks Investment Research
Conclusion
TSMC once again maintained a wide lead over its pure-play foundry peers, backed by continued progress in leading-edge process technologies and advanced packaging. Its stock has delivered a stronger return than both the sector and the broader market. The company also sees an opportunity in agentic AI, which is increasing the role of CPUs in AI data centers and adding to demand beyond AI accelerators. TSMC is also expanding its N3 capacity globally while advancing its next-generation A14 technology.
Technical indicators suggest that the shares will continue to rise. With its current earnings multiple still below the historical median, TSMC offers an appealing investment opportunity at this time.
View the Zacks #1 Rank List
Image: Bigstock
Taiwan Semiconductor Retains 73% Foundry Share: Is the Stock a Buy?
Key Takeaways
The pure-play foundry sector continued to benefit from the surge in artificial intelligence (AI)-related demand in the second quarter of 2026, with revenues rising 29% year over year, according to Counterpoint Research. Capacity reallocation remained a major cause of supply-demand imbalances across both advanced and mature nodes. Taiwan Semiconductor Manufacturing Company (TSM - Free Report) , or TSMC, maintained its dominant position, capturing 73% market share for the second consecutive quarter. This is supported by the company’s mass production of 2-nanometer (N2) chips, the ramp-up of 3-nanometer (N3) production, tight supply across 8-inch and 12-inch mature nodes and advanced packaging.
Reflecting this momentum, TSM stock has risen 41.1%, far outpacing the sector’s 17.9% growth and the S&P 500 composite’s 12% return.
Image Source: Zacks Investment Research
TSMC remains far ahead of the other pure-play foundries. United Microelectronics Corp. (UMC - Free Report) held a 4% share of the market in the first half of 2026, matching its performance from the third and fourth quarters of 2025. Just below UMC, GlobalFoundries (GFS - Free Report) maintained a 4% market share throughout 2025, before edging down to 3% in the first half of 2026.
Factors Supporting TSMC
The company’s near-term outlook is being shaped by sustained strong demand for its leading-edge process technologies. The AI boom continues to drive demand for greater computing power, supporting strong demand for leading-edge silicon. Management said its customers and their customers, particularly cloud service providers, continue to provide strong demand signals, keeping its confidence in the multi-year AI trend high.
The rise of agentic AI is bringing CPUs back into a more prominent role in AI data centers, adding to silicon demand beyond AI accelerators. TSMC expects to benefit from this trend, regardless of whether customers use x86, Arm-based or RISC-V architectures. The company is already working with its CPU customers to provide the advanced technologies and capacity needed to pursue opportunities in agentic AI.
TSMC is also stepping up its capital spending, which management says is correlated with higher growth opportunities in the following years. The company is building 13 leading-edge and advanced packaging fabs in Taiwan and plans to continue investing in the country. It also announced an additional $100 billion investment in Arizona for wafer fabs supporting N2 and below technologies, along with advanced packaging facilities, to meet strong multiyear demand from its leading U.S. customers.
Execution also continues for TSMC’s global plan to add three additional N3 fabs — one each in Taiwan, Arizona and Japan to support the robust multiyear pipeline of demand. The company is also converting 5-nanometer (N5) tools in Taiwan to support N3 capacity while optimizing capacity across nodes, including flexible support among N7, N5 and N3.
TSMC’s A14 technology is progressing as planned, with pre-production set for 2027 and volume production in 2028. Compared with N2, A14 is expected to deliver 10% to 15% higher performance at the same power or 25% to 30% lower power at the same speed, along with nearly 20% higher chip density. The company is observing a strong level of customer interest and engagement from both smartphone and High-Performance Computing AI applications, with customer tape-out activity already underway and ahead of schedule.
Technical indicators also signal a sustained bullish trend, as TSMC currently trades above its 50- and 200-day simple moving averages.
Image Source: Zacks Investment Research
TSMC’s Valuation
Based on the forward 12-month Price/Earnings (P/E), TSM trades at 21.84X compared with its median of 24.39X. The stock also stays cheaper than GlobalFoundries, which trades at a P/E of 23.43X compared with the 29.03X median.
Image Source: Zacks Investment Research
Meanwhile, United Microelectronics sits with a P/E of 18.20X, a discount relative to TSMC, though still at a premium to its own median of 16.92X.
Image Source: Zacks Investment Research
Conclusion
TSMC once again maintained a wide lead over its pure-play foundry peers, backed by continued progress in leading-edge process technologies and advanced packaging. Its stock has delivered a stronger return than both the sector and the broader market. The company also sees an opportunity in agentic AI, which is increasing the role of CPUs in AI data centers and adding to demand beyond AI accelerators. TSMC is also expanding its N3 capacity globally while advancing its next-generation A14 technology.
Technical indicators suggest that the shares will continue to rise. With its current earnings multiple still below the historical median, TSMC offers an appealing investment opportunity at this time.
TSM sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.