TSM · NYSE Semiconductors · Pure-Play Foundry
TSMC's technology lead and AI-driven advanced-node demand support a $445 base value, but the investment case increasingly depends on converting an unprecedented global capacity expansion into durable customer commitments without allowing overseas startup costs or rival foundry buildouts to erode utilization and pricing.
One-minute investment view
Core thesis
Q2 2026 revenue increased 33.7% in U.S. dollars to $40.2 billion, HPC represented 66% of revenue, and 7-nanometer-and-below technologies produced 77% of wafer revenue. That mix gives TSMC a strong demand base for N2, A16, A14, and advanced packaging.
Expansion driver
TSMC is adding advanced capacity in Taiwan, Arizona, Japan, and Germany. Management's latest Arizona plan totals $265 billion and contemplates at least four additional front-end and back-end fabs, while new N3 capacity is planned across Taiwan, Arizona, and Japan.
Key debate
Overseas ramps are expected to dilute gross margin by 2 to 4 percentage points over time. Samsung, Intel, and other government-supported programs are also adding advanced foundry capacity, raising the risk that industry supply, incentives, or pricing competition grows faster than end demand.
Operating case
The base case assumes TSMC sustains approximately 25% revenue growth through 2030 as N2, A16, A14, and CoWoS expand, but it does not assume overseas production is immediately margin neutral. EBITDA margin eases to 72.5% as Arizona, Japan, and Germany scale, while free cash flow grows more slowly than earnings during the $60–64 billion 2026 capital program before improving with utilization.
| Metric | 2025A | 2026E | 2027E | 2028E | 2029E | 2030E |
|---|---|---|---|---|---|---|
| Revenue | $119.1B | $164.0B | $209.0B | $259.0B | $311.0B | $360.0B |
| Adjusted EBITDA | $85.7B | $121.0B | $154.0B | $190.0B | $227.0B | $261.0B |
| EBITDA margin | 72.0% | 73.8% | 73.7% | 73.4% | 73.0% | 72.5% |
| Free cash flow | $30.8B | $38.0B | $55.0B | $76.0B | $100.0B | $125.0B |
Valuation
N2, A16, A14, and advanced packaging sustain share and pricing while global fab additions follow committed customer demand; overseas dilution is offset by mix, productivity, and higher utilization.
Base case · USD billions
Implied share price
| WACC \ g | 3.5% | 4.0% | 4.5% |
|---|---|---|---|
| 8.0% | $451 | $500 | $563 |
| 8.5% | $404 | $445 | $491 |
| 9.0% | $367 | $398 | $436 |
Point-in-time operating and valuation snapshot
| Company | Ticker | Revenue growth | EBITDA margin | EV / EBITDA | FCF yield |
|---|---|---|---|---|---|
| TSMC | TSM | 34% | 74% | 18.7x | 1.8% |
| Samsung Electronics | 005930.KS | — | — | — | — |
| Intel | INTC | 25% | 22% | 33.2x | 0.2% |
| GlobalFoundries | GFS | 1% | 35% | 15.5x | 3.2% |
| United Microelectronics | UMC | — | — | — | — |
Catalysts and risks
Potential catalysts
Strong yields, customer tape-outs, and packaging availability can extend TSMC's technology lead and increase content per AI system.
Successful ramps in Arizona, Japan, and Germany can improve supply resilience, deepen strategic customer relationships, and unlock government-supported capacity economics.
Sustained accelerator, custom-silicon, CPU, and networking demand can fill leading-edge wafer and CoWoS capacity faster than TSMC adds it.
Principal risks
The 2026 capital budget is $60–64 billion, and overseas fabs are expected to dilute gross margin by 2 to 4 percentage points as the network expands. Delays, weaker utilization, labor costs, or customer mix could keep cash conversion below the base case.
Samsung targets a much larger advanced-node footprint, while Intel and other government-supported programs are building domestic capacity. Better rival yields, aggressive pricing, or customer diversification could reduce TSMC's share and returns on new fabs.
TSMC's most advanced manufacturing remains concentrated in Taiwan. Cross-strait tension, export controls, earthquakes, power constraints, or supply-chain disruption could impair production and overwhelm valuation assumptions.
Sources and methodology
TSMC annual income statement data supplied by the user for 2022–2025 and the trailing period, supplemented by the FY2025 Annual Report and Q2 FY2026 company results. TWD financials were translated into U.S. dollars for the ADR model.
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July 2026 scenario DCF anchored to FY2025 actuals, Q2 FY2026 results, the raised $60–64B 2026 capital budget, and the global production plan. The $445 base case assumes 24.8% revenue CAGR through 2030, a 72.5% adjusted EBITDA margin, $125B of 2030 free cash flow, an 8.5% WACC, and 4.0% terminal growth. Forecasts, net-cash adjustments, ADR conversion, and peer figures are illustrative and should be independently verified.
Independent student research for educational purposes only. Not investment advice or a recommendation to buy, sell, or hold securities. Verify all financial inputs and model assumptions independently.