Taiwan Semiconductor Manufacturing Company serves as the primary foundry partner for the leading U.S. AI chip designers, supporting over 90% of advanced data-center GPU production. Its Arizona fabrication complex has moved from pilot production into commercial ramp-up, adding capacity for 5-nanometer and 3-nanometer nodes. This domestic footprint satisfies U.S. government incentives while shortening supply chains and providing resilience for hyperscale customers. TSMC’s engagements include multi-year supply agreements with three of the top five AI infrastructure providers, positioning it as an indispensable element in America’s computing backbone.

In fiscal 2025, TSMC reported revenue of $122.4 billion, a 36% year-over-year increase, marking its first annual revenue above $100 billion. Gross margin expanded from 56.1% to 59.9%, and operating margin rose from 45.7% to 50.8%. Fourth-quarter gross margin reached 62.3% with an operating margin of 54.0%. Net income climbed by more than 40%, reflecting strong pricing power on advanced nodes and further reinforcing the company’s ability to convert incremental wafer shipments into outsized profit growth.

TSMC has committed to capital expenditures of $52 billion to $56 billion in 2026, up approximately 20% from the prior year, with investments concentrated on its 3-nanometer and 2-nanometer node expansions, advanced packaging facilities, and the second Arizona fab line. Production capacity for 3-nanometer wafers is slated to grow from 150,000 to 200,000 wafers per month by late 2026, while 2-nanometer output is on track to quadruple. Advanced packaging throughput, including CoWoS (chip-on-wafer-on-substrate) modules, is expected to increase by 60%, addressing packaging bottlenecks for high-performance GPUs.

Despite its dominant position in high-end foundry services and sustained double-digit top-line growth, TSMC trades at roughly 25 times next-year earnings forecasts, representing a significant discount to comparable pure-play foundries and fabless peers. On a forward PEG basis, the company sits below 1.0 against a sector median near 1.6, even though TSMC targets 20-25% annual revenue growth and net margins near 50%. Should the market reprice the shares to reflect sustained AI-driven expansion and durable pricing power, upside scenarios in the range of 40% to 60% above current levels become plausible.