Taiwan Semiconductor Manufacturing’s share price has climbed 50% over the past 12 months, pushing it to an all-time high. This rally is underpinned by 21% year-over-year revenue growth and 35% net income growth, marking the eighth consecutive quarter of profit increases. With a profit margin near 50% and a forward price-to-earnings ratio of 26 compared with the S&P 500’s 22, TSMC’s valuation appears reasonable for a market leader manufacturing the most advanced chips.

TSMC forecasts that AI-related revenue will grow at a 60% compound annual growth rate from 2024 through 2029, reflecting surging demand from data centers and AI developers. Management has guided for approximately 30% overall revenue growth in 2026, driven by ramping production of next-generation processes for key clients. Nvidia and Apple remain the largest contributors, accounting for over half of wafer revenues in the most recent quarter.

To reduce concentration risk in Taiwan, TSMC’s Arizona facility is ramping up production of mature and specialty nodes, with first chips expected to ship in mid-2026. This U.S. expansion supports domestic customers and aligns with government incentives to onshore semiconductor manufacturing. By stepping up investment outside Taiwan, the company aims to safeguard supply continuity and reassure international investors concerned about cross-strait tensions.

While TSMC’s fabs are operating at near-full capacity for leading-edge nodes, this tightness has prompted some clients to explore alternative suppliers and capacity expansions. Despite record utilization rates, TSMC plans to allocate $31 billion in capital expenditures this year to boost output. The capacity crunch underscores the company’s pricing power but also opens opportunities for challengers in mature-node segments.