Taiwan Semiconductor Manufacturing Company makes almost every advanced chip in the world, including Nvidia’s, AMD’s and Apple’s. Revenue is growing about 44% this year at a 66% gross margin. Its shares trade in New York as ADRs (one ADR is five Taiwan shares); figures are in U.S. dollars.
Today’s close against the report’s numbers, updated every weekday. The analysis is as of October 22, 2026; the rating as of October 22, 2026. Both change only when the report is revised.
Per ADR: the cash-flow model’s bear-to-bull range, the probability-weighted value, the price, its 52-week range and the analysts’ average target. The copper line marks the base case; the fine dotted line is today’s close.
Written on October 22, 2026, after its third-quarter results. Figures are from the company’s filings and releases unless noted. Not investment advice. The author holds no TSM shares directly; TSMC is held inside the VanEck Semiconductor ETF (SMH) in the author’s portfolio.
TSMC does not design chips; it manufactures them for the companies that do. It makes nearly all of the most advanced ones: Nvidia’s AI accelerators, Apple’s processors, AMD’s CPUs and GPUs, and the custom AI chips Google, Amazon and others design. It also packages them together with memory (CoWoS), which has been the tightest bottleneck in AI hardware.
Its edge is manufacturing at the leading edge, now the 2-nanometer (N2) process, at a scale and yield no rival matches. Most production is in Taiwan, with new fabs in Arizona, Japan and Germany.
Third-quarter revenue rose 41% in dollars to $46.7 billion and profit about 69%. The gross margin of 66.4% slipped 1.3 points from the second quarter as the 2-nanometer ramp diluted it. N2 was 8% of wafer revenue, and its capacity should more than double in 2027.
TSMC guided fourth-quarter revenue to $52.3–54.3 billion and expects about 44% growth for 2026. Management said its forecast of mid-to-high-50s% annual growth in AI accelerator revenue through 2029 will “probably” be higher, but warned that overseas fabs will dilute the gross margin by 3–4 points in later years. Capital spending of $60–64 billion this year will rise “even more significantly” in 2026–2028.
| 2023 | 2024 | 2025 | 2026 estimate | |
|---|---|---|---|---|
| Revenue | $69.3B | $90.1B | $122.4B | about $176B |
| Revenue, NT$ | NT$2,162B | NT$2,894B | NT$3,809B | — |
| Gross margin | 54.4% | 56.1% | 59.9% | about 66% |
| Operating margin | 42.6% | 45.7% | 50.8% | about 58% |
| Capital spending | $30.4B | $29.8B | $40.9B | $60–64B |
TSMC reports in New Taiwan dollars and files a 20-F with the SEC as a foreign company, so the site’s automatic tables do not cover it; these figures come from its results releases. The 2026 column uses the first three quarters and fourth-quarter guidance.
TSMC holds far more cash than debt; this model uses net cash of about $60 billion (an estimate from its latest balance sheet). It pays a quarterly dividend it intends to keep raising. There are about 25.9 billion Taiwan shares, or 5.19 billion ADR-equivalents.
| Assumption | Base case | Basis |
|---|---|---|
| Revenue, 2026 | $176B | About 44% growth, company guidance |
| Growth, 2027 and 2028 | 25%, then 20% | AI demand and N2; fades to 3% by year 10 |
| Operating margin | 57% easing to 54% | Overseas fabs dilute by 3–4 points over time |
| Reinvestment | $1 for every $1.30 of new revenue | Capex far above depreciation |
| Discount rate | 10.7% | Beta 1.24, net cash |
| Terminal growth | 3.0% | With a 25% return on new capital |
| Bear | Base | Bull | |
|---|---|---|---|
| Growth, 2027 / 2028 | 12% / 8% | 25% / 20% | 32% / 25% |
| Long-run operating margin | 48% | 54% | 57% |
| Discount rate | 11.7% | 10.7% | 9.7% |
| Value per ADR | $208 | $411 | $620 |
| Probability | 25% | 50% | 25% |
Weighted 25/50/25: $412. The bear case is the usual chip downturn after a capacity boom plus heavier overseas dilution; the bull case is AI demand running ahead of TSMC’s own forecast.
| Discount rate | 9.5% | 10.0% | 10.5% | 11.0% | 11.5% |
|---|---|---|---|---|---|
| Value per share | $495 | $457 | $425 | $396 | $371 |
Every figure in this valuation comes from one model script, rerun and checked against this page each time the site is built. The XLSX model rebuilds it in live formulas: change any blue input and every year’s cash flow, the bridge to the value, the scenarios and the sensitivity table recalculate.
| To justify the price, you need | Against |
|---|---|
| Revenue growth of about 21% a year for two years, then the same fade | 25% and 20% |
| Or a long-run operating margin of about 54% | 54% |
The price matches the base case almost exactly: investors are paying for the growth TSMC itself is forecasting, no more. Analysts average about $529. The shares fell 4.5% on October 22 in the chip-equipment selloff that followed Lam Research’s supply warning.
| Risk | Why it matters |
|---|---|
| Taiwan | Most capacity is in Taiwan; any conflict or blockade would be the largest single risk to the chip industry. |
| The chip cycle | Capacity booms have always been followed by downturns; capex is rising sharply. |
| Overseas costs | Arizona, Japan and Germany fabs cost more to run and dilute margins. |
| Customer concentration | Apple and Nvidia are a large share of revenue. |
| Tariffs and export rules | U.S. chip tariffs and China export limits could change where and for whom it builds. |
Upside: AI accelerator growth above management’s forecast, N2 pricing, advanced packaging capacity, and a stronger Taiwan dollar lifting dollar results.
TSMC makes almost every advanced chip and is growing about 44% this year at a 66% gross margin. The price matches the model’s base case, which follows management’s own outlook. The concentration of production in Taiwan is a risk no model captures well.
What would change the value: Fourth-quarter results in January with 2027 guidance, N2 pricing and the size of the 2027 capex increase are the next inputs.
Ranges, not three cases. The expected value is the average of 4,000 runs of this report’s own model, with every input drawn from a range: the base case is the middle, and the bear and bull cases are the 10th and 90th percentiles. Business inputs move together; the discount rate moves on its own. The 25/50/25 weighting in the valuation section gives $412. How the ranges work
Two different questions. The rating is relative: it asks whether the stock is cheaper or dearer than the S&P 500 on the same assumptions. The absolute view asks whether it is worth its price at all: on its own the stock trades within 10% of our estimated value.
On the same assumptions every report uses (a 5.15% Treasury yield and a 4.5% equity premium), the S&P 500 itself is worth about 68% of its price. The rating compares each stock with that: Buy if it is at least 15% cheaper than the market on this basis, Sell if at least 15% dearer, Hold in between. It is the same rule for every company, whoever owns it. The rating is the same whether the index is assumed to grow 6% or 10% a year. How ratings work
Against the Street: Analysts average about $529, assuming growth stays above 25% for longer. The base case here follows TSMC’s own forecast and fades growth from 2029.
The price pays for the plan; the risk is geography and the cycle.
| What | Figures | Source |
|---|---|---|
| Latest results | $46.7B (Revenue, Q3 2026, +41%), 66.4% (Gross margin), 58.7% (Operating margin), +44% (2026 revenue growth, in dollars) and others | Q3 2026 earnings call |
| Price at writing | $412.35 (ADR close, Oct 22, 2026) | Yahoo Finance; the time of the quote is stated beside the price |
| Discount rate inputs | 10-year Treasury 5.15%, equity risk premium 4.5% | Fixed for every report so they can be compared; How ratings work |
| Valuation | Every value, case and sensitivity | This site’s model: XLSX, CSV |
| Checked by hand | Not yet | Reports are added to the audit log as they are revised |
| Input | Bear (10th percentile) | Base (median) | Bull (90th percentile) |
|---|---|---|---|
| Growth, first forecast year | 12.0% | 25.0% | 32.0% |
| Growth, second forecast year | 8.0% | 20.0% | 25.0% |
| Operating margin, near term | 52.0% | 57.0% | 59.0% |
| Operating margin, long run | 48.0% | 54.0% | 57.0% |
| Discount rate | 11.7% | 10.7% | 9.7% |
| Simulation result | |
|---|---|
| Expected value (average of 4,000 runs) | $393.96 |
| Likely range, 10th to 90th percentile | $247.36 to $540.19 |
| Median | $393.37 |
| Chance the value is above the price | 44% |
| Chance it is cheaper than the S&P 500 | 83% |
Each input is drawn from a split normal: its bear and bull values are the 10th and 90th percentiles, so the two sides can differ. Business inputs share a common factor (correlation 0.6); the discount rate moves on its own. Inputs not listed are held at their base value. How the simulation works.