TSMC to Spend $56B Capex After 36% 2025 Revenue Surge
Taiwan Semiconductor recorded $122.4 billion revenue in 2025, up 36% year-over-year, and expanded gross margin to 59.9% and operating margin to 50.8%, achieving its first $100 billion revenue year. The company plans to invest $56 billion in capital expenditures in 2026 to meet surging AI chip demand while trading at 25× projected earnings.
1. TSMC Posts Record 2025 Revenue and Margin Expansion
Taiwan Semiconductor Manufacturing Company (TSMC) achieved its first-ever $100 billion revenue year in 2025, generating $122.4 billion in sales, a 36% increase over 2024. Gross margin expanded from 56.1% to 59.9%, while operating margin rose from 45.7% to 50.8%. In the fourth quarter alone, TSMC delivered a gross margin of 62.3% and an operating margin of 54.0%. These figures underscore the company’s operational execution, pricing power and its virtual monopoly on advanced AI chip production.
2. Dominant AI Chip Manufacturer Trades at Relative Discount
Despite a 69% share price increase since the start of 2025, TSMC trades at approximately 25 times projected earnings for the next twelve months, below the multiples assigned to peers such as Nvidia and Broadcom. The company’s near-100% market share in advanced AI chips for data centers, combined with 36% revenue growth and double-digit margin expansion, suggests that the current valuation offers a compelling entry point for long-term investors seeking exposure to the AI super-cycle.
3. U.S. Expansion and Capital Expenditure Plans
TSMC has committed to invest $250 billion in U.S. operations over the next decade, including the recent groundbreaking of a new Arizona fab slated to produce N3 node wafers. The company raised its annual capital expenditure guidance to a range of $52 billion to $56 billion for 2026–2029, reflecting confidence in sustained AI and HPC demand. This investment cadence is supported by a cash and short-term investment balance of TWD 3.07 trillion (up 26.7% year-on-year) and positive free cash flow of TWD 223.1 billion in 2025.
4. Long-Term Growth Trajectory and Valuation Upside
Management forecasts revenue growth near 30% for 2026, contributing to a 25% compound annual growth rate through 2029. At current levels, TSMC trades on roughly 32 times trailing earnings and 14.5 times sales, which, when adjusted for its 20-25%+ revenue CAGR and near-50% net margins, yields a forward PEG ratio below 1.0. Analysts have identified potential upside scenarios that could drive the stock toward $475–$685 per share if AI infrastructure spending continues and advanced node economics hold, making the equity a high-conviction play on the durability of the AI super-cycle.