A $100 Billion Reason to Buy Taiwan Semi Stock Now

Taiwan Semiconductor (TSM), the world’s largest dedicated semiconductor foundry and one of the most valuable chip companies, handed investors two major reasons to pay attention this week.

On Thursday, July 16, TSMC reported Q2 FY2026 earnings that comfortably cleared Wall Street's expectations. Net profit jumped 77.4% year-over-year (YOY) to NT$706.6 billion ($21.9 billion), surpassing Street’s estimate of NT$632.6 billion ($19.6 billion). This proved once again that the artificial intelligence (AI) boom is flowing straight into the company's bottom line.

Even so, the earnings report is not the week's biggest story. It is TSMC’s plan to invest another $100 billion to expand its semiconductor manufacturing footprint across the United States, reinforcing its long-term partnership with Washington while deepening production ties between the U.S. and Taipei.

The commitment pushes the company's total planned investment to $265 billion. Moreover, the expansion will fund four more advanced semiconductor manufacturing facilities, increasing TSMC's total network in the U.S. to 12 leading-edge semiconductor and advanced packaging facilities.

The announcement also marks another milestone in America's push to strengthen domestic chip production. TSMC first committed $65 billion to its Arizona operations through the Biden administration's CHIPS Act. The company later lifted that figure to $165 billion in 2025 after the Trump administration renegotiated several semiconductor agreements. 

Now, another $100 billion has entered the picture, making TSMC's American expansion one of the industry's largest investment programs.

About TSMC Stock 

Headquartered in Hsinchu City, Taiwan, Taiwan Semiconductor manufactures cutting-edge chips that power high-performance computing systems, smartphones, automotive technologies, Internet of Things devices, AI platforms, and everyday consumer electronics.

Commanding a market cap of $2.13 trillion, it offers wafer fabrication, packaging, testing, mask manufacturing, and engineering support services to some of the global tech giants, including Nvidia Corporation (NVDA), Apple (AAPL), and Broadcom (AVGO). 

Investors have rewarded that leadership. TSM stock rallied 61.7% over the past 52 weeks and has already gained 30.7% year-to-date (YTD). But the momentum cooled in recent weeks, with the shares decreasing 8.5% over the last month.

The strong run has naturally lifted the stock's valuation. Its shares are currently trading at 27.17 times forward adjusted price-to-earnings Non-GAAP and 11.67 times sales. Both multiples sit above their respective five-year average multiples, indicating that investors continue to assign a premium to its market leadership.

Also, the company rewards shareholders with regular cash returns. TSMC last paid an annual dividend of $2.76 per share, yielding 0.67%. It is scheduled to distribute its latest quarterly dividend of $1.11 per share on Oct. 8 to shareholders of record as of Sept. 16.

A Closer Look at TSMC’s Q2 Earnings

On July 16, TSMC reported impressive Q2 FY2026 earnings. Total revenue reached $40.2 billion, representing a 36% YOY increase. The result landed at the upper end of TSMC's own guidance in U.S. dollar terms after robust customer demand continued to drive shipments of leading-edge process technologies.

The company also expanded profitability across every major measure. Gross margin climbed to 67.7%, while operating margin reached 60.3%. Net profit margin stood at 55.6%, highlighting the remarkable operating leverage that continues to set TSMC apart from most semiconductor manufacturers.

Strong appetite for high-performance computing chips used in data centers, healthy adoption of advanced 3-nanometer and early 2-nanometer technologies, and sustained orders from leading AI chip designers and hyperscalers kept the company's most advanced manufacturing lines running at full speed. 

Looking forward, management expects that momentum to continue. They project Q3 FY2026 revenue to range between $44.6 billion and $45.8 billion, representing sequential growth of 12% and YOY growth of 37% at the midpoint. 

They have also raised their full-year FY2026 capital expenditure budget to between $60 billion and $64 billion, citing sustained structural demand from customers, including the rapidly emerging agentic AI market. 

Analysts expect the company's earnings growth to remain equally impressive. Wall Street forecasts Q3 FY2026 EPS of $4.08, representing 39.7% YOY growth. Analysts also expect full-year earnings to climb 45.6% to $15.51 per share before increasing another 27.6% to $19.79 per share in FY2027.

What Do Analysts Expect for TSMC Stock?

Needham analyst Charles Shi reaffirmed a “Buy” rating on TSM stock and raised his price target to $480 from $410, reflecting confidence in the company's long-term growth prospects, strong competitive position, and continued leadership in the semiconductor industry. 

Wall Street shares that upbeat view and has assigned the stock an overall rating of “Strong Buy.” Among the 17 analysts covering the name, 13 recommend “Strong Buy,” two assign a “Moderate Buy” rating, and two suggest investors “Hold” the shares. 

Analysts have backed that confidence with higher price targets. The average price target stands at $467.77, implying an upside of 16.5% from current levels. At the top end, Susquehanna analyst Mehdi Hosseini has set a Street-High target of $600, pointing to a gain of 49.4%.