Key Morningstar Metrics for TSMC
- : USD 534Fair Value Estimate
- : ★★★Morningstar Rating
- : WideMorningstar Economic Moat Rating
- : MediumMorningstar Uncertainty Rating
What We Thought of TSMC’s Earnings
Taiwan Semiconductor Manufacturing Company raised its 2026 capex budget by USD 8 billion to USD 62 billion at the midpoint and full-year revenue growth target to over 40% in US dollars. It announced plans to invest an additional USD 100 billion in Arizona, cumulatively totaling USD 265 billion.
Why it matters: We believe higher full-year revenue and capital expenditure guidance ease concerns about the durability of artificial intelligence growth and supply chain bottlenecks. The capex hike is a response to hyperscalers raising their 2027 budgets. We raise our 2026 to 2030 capex forecasts by 22% on average.
- TSMC TSM‘s expanded investment plans in Arizona show durable demand growth in US AI data center customers, and it doubles as a hedge against potential tariffs and geopolitical risks. We suspect TSMC is vague on timing to reserve flexibility in case of a temporary slowdown in AI buildout.
- We expect price hikes in 2027 due to higher raw material costs and tight supply. Meanwhile, the higher 2026 revenue guidance reflects AI demand benefiting both leading-edge and mature processes, plus production of more expensive 2-nanometer chips ramping up faster than expected.
The bottom line: We raise our fair value estimate for wide-moat TSMC to TWD 3,440 (USD 534 per ADR) from TWD 2,700 (USD 428 per ADR) as we believe hyperscalers’ elevated spending in the coming years justifies TSMC’s bigger capex budget.
- We believe the market is overly cautious about recent financing activities to build more data centers. Nvidia’s revenue-sharing scheme may sound alarming, but the scale of neoclouds is dwarfed by stratospheric investments by hyperscalers like Microsoft and Alphabet.
Big picture: TSMC sees no material bottlenecks to expansion. We attribute this confidence to its supplier ASML’s plans to increase capacity by 30% in 2027 and another 30% in 2028. Our higher TSMC capex estimates also hinge partly on ASML’s ability to execute its expansion.
