TSMC Just Flexed Its Cash and Raised the Stakes in America After Record AI-Driven Earnings

Taiwan Semiconductor Manufacturing (TSM) is significantly increasing its business in America. The company has announced investing another $100 billion to expand its chipmaking in the U.S., on top of what it had already committed. Initially, TSMC pledged $65 billion for its Arizona plants under the Biden administration. In 2025, the amount was raised to $165 billion as the Trump team renegotiated the earlier chip deals. The additional spending plans now take the total U.S. investment to $265 billion. The investment will pay for four more advanced factories, bringing its U.S. total to 12 semiconductor and packaging facilities. The move is tied to a wider trade agreement between Washington and Taipei. U.S. Secretary of Commerce Howard Lutnick called it a historic deal, expecting the agreement to create tens of thousands of jobs in America. In late 2024, TSMC started creating its 4-nanometer chips in the U.S. By the second half of 2027, it expects to start manufacturing its more advanced 3-nanometer chips.  

The timing lines up with a strong moment for the company. On the same day as this expansion was announced, the company posted record second-quarter results. The revenue for the company increased considerably, while the net profit was also reported at an all-time high. The vast majority of this growth came from TSMC’s AI chips, which now make up two-thirds of its business. TSMC manufactures nearly all the world’s most advanced AI chips, from Nvidia’s (NVDA) to those designed by Amazon (AMZN) and Alphabet's (GOOG) (GOOGL) Google. This is why it can keep spending at this scale. It's because the demand for AI chips is still running ahead of what the company can supply.

About Taiwan Semi Stock 

Taiwan Semiconductor Manufacturing is the world’s largest contract chipmaker, producing semiconductors designed by other companies. The company manufactures advanced chips used in smartphones, AI, automotive technology, and high-performance computing. Founded in 1987, the company is headquartered in Hsinchu, Taiwan, and is led by Chairman and CEO C.C. Wei. 

Over the last 12 months, TSM stock has surged 68%, driven by extraordinary AI chip demand and record earnings quarter after quarter. The company has still underperformed the iShares Semiconductor ETF (SOXX), which gained 121% during the same period. In the past month, though, the company’s stock price has fallen 8%, likely due to the broader semiconductor selloff.

TSMC’s strong recent performance and exceptional earnings outlook explain why its stock is trading at a premium to its own history. The forward GAAP price-to-earnings (P/E) of 24.64x sits around 11% above the company’s 5-year average of 22.10x. The forward price-to-sales (P/S) ratio of 11.54x makes TSM stock seem even more expensive, trading 45% above its 5-year average of 7.94x. The EPS growth trajectory justifies the premium well. The earnings are expected to grow 57% in 2026, 27% in 2027, and a further 32% in 2028. For a company already worth nearly $2 trillion, that kind of growth is exceptional. The balance sheet also strengthens the valuation. TSMC holds $110.56 billion in cash against just $30.88 billion in debt. The resulting net cash positive of close to $80 billion means that the company can keep funding its expansion without being worried. So while the stock isn’t cheap on paper, the rapid earnings growth and strong balance sheet suggest the premium is deserved. 

Taiwan Semi’s Profit Hits a Record as AI Demand Runs Hot

TSMC reported its second-quarter fiscal 2026 earnings on July 16. Revenue reached $40.2 billion, or NT$1.27 trillion, increasing 36% year-on-year (YoY), and at the high end of the company’s own guidance. Net profit jumped 77% from a year earlier to a record high. The gross margin of 67.7% came in ahead of the guidance. CFO Wendell Huang credited the strong demand for the company’s leading-edge process technologies as the driver of the record quarter. The CEO also stated that the AI-related demand continues to be “extremely robust” and that the additional $100 billion investment in Arizona is to meet that demand. 

For the third quarter, the company expects revenue of $44.6 billion to $45.8 billion. The gross margin for the quarter is guided at 65% to 67%. Much like the second quarter, the CFO expects the momentum to continue due to the strong demand for its leading-edge process technologies. He believes that the business for TSMC’s 2-nanometer technology will grow substantially. This indicates a big shift for the chip that accounted for just 3% of total wafer revenue in the last quarter. TSMC also raised its full-year 2026 revenue growth forecast to above 40%. 

What Are Analysts Saying About TSM Stock?

Barclays analyst Simon Coles raised the firm’s price target on TSM from $625 to $650 and maintained a “Buy” rating on the stock. The analyst had only recently increased the price target from $470 to $625. Similarly, Susquehanna analyst Mehdi Hosseini also raised the firm’s price target on TSM stock from $575 to $600 and reiterated a “Buy” rating. The positive outlook comes on the same day as the company reported a successful second quarter. 

Based on the 17 Wall Street analysts with coverage, TSM stock holds a consensus “Strong Buy” rating. The mean price target of $497.77 reflects a 22% upside from the current share price.