During a recent industry shift driven by explosive AI demand, Nvidia surpassed a major consumer electronics company to become the top client of Taiwan Semiconductor Manufacturing. This milestone, confirmed by Nvidia’s CEO on a public podcast, underscores TSM’s central role in the AI supply chain. With Nvidia accounting for an estimated 20% of TSM’s quarterly revenue—up from 15% a year earlier—this new customer mix is reshaping TSM’s sales profile and reinforcing its dependence on high-performance computing workloads.

Of the 49 analysts covering TSM, 98% rate the shares as a buy, reflecting strong confidence in the foundry’s business model. The consensus target price implies roughly 25% appreciation over the next 12 to 18 months, based on projected earnings per share rising from $10.65 in 2025 to $13.05 in 2026. Trading at a forward P/E multiple of 31, TSM’s valuation remains attractive relative to its peers, suggesting further upside once it delivers on robust sales and profit growth.

TSM closed out 2025 with a remarkable 54% gain in its stock price, driven by full-year revenue growth of 36% to approximately $122 billion. Fourth-quarter sales advanced 26% year-over-year, extending a streak of quarterly increases above 35% earlier in the year. Management forecasts 30% sales growth for 2026 and aims for a compound annual growth rate of 25% through 2029. These targets are underpinned by planned capital expenditures rising to about $54 billion next year, focused on advanced process technologies.

High-performance computing, which encompasses artificial intelligence workloads, generated 58% of TSM’s revenue in 2025 and grew 48% year-over-year. TSM expects AI chip revenues to expand at a mid- to high-50% compound annual growth rate through 2029. To meet this surge in demand, the company is allocating 70% to 80% of its 2026 capex to its most advanced node fabs. These investments are critical to maintaining capacity leadership and margin expansion, with management guiding for gross margins above 56% on a long-term basis.