The AI Giant That's Up 72% Since 2025 - And Still Priced Right for 2026
Everyone's watching Nvidia and Broadcom. But the quiet winner behind much of the AI chip boom is Taiwan Semiconductor Manufacturing (TSMC). The stock has climbed about 72% since the start of 2025 and kept moving after strong fourth-quarter results and a confident outlook for 2026.
If you're looking for durable growth at a still-reasonable price, this is the name to keep on your screen.
Why TSMC Sits at the Center of AI
TSMC is the world's dominant contract chipmaker, and its lead widened through 2025. Its estimated foundry share reached roughly 72% as top customers funneled massive orders to secure capacity on its most advanced nodes. Even Nvidia's CEO has publicly called TSMC the best manufacturer by a wide margin - and the customer list backs that up.
Here's the flywheel: elite technology attracts elite customers, which funds more capacity and R&D, which then pulls in even larger, longer commitments. AI accelerators lean on TSMC's cutting-edge processes, and that demand gave the company the leverage to raise prices on a set of chips that made up the bulk of revenue. Management plans annual price increases on those products through 2029 and is pricing its next-gen process at a premium.
Spending More Because Demand Is Bigger
Management is stepping on the gas to meet demand. Capital expenditures for 2026 are projected at $52 billion to $56 billion, up roughly 32% at the midpoint. That spending will push depreciation higher starting this year - but TSMC expects revenue to grow even faster.
The company lifted its five-year compound annual growth outlook to 25% (for the period beginning in 2024). After posting 36% revenue growth in 2025, that guide implies roughly 22% annual growth through the end of the decade. With pricing power intact, gross margin should stay high and operating margin has room to expand, which means earnings can grow ahead of revenue as those fabs fill.
For more on the company's guidance and long-term plan, see TSMC's investor materials here.
Valuation: Still Attractive Versus Peers
Despite the run, TSMC trades at less than 24 times forward earnings. Stack that against Broadcom at roughly 41x and Nvidia around 32x, and the discount stands out given TSMC's central role in AI supply. If management hits its growth targets while maintaining margin discipline, there's room for both earnings expansion and potential multiple catch-up.
What Could Change the Story
Every great setup has watch-outs. Key risks include execution on new nodes and fabs, supply and equipment timing, customer concentration, and geopolitical tensions. None of those are new, but they're worth tracking when a company is scaling this quickly.
What to Watch in 2026
- Advanced node ramps: Progress on N3 and next-generation processes, including yields and capacity utilization.
- Pricing cadence: Confirmation of planned annual increases through 2029 and any premium pricing on the next node.
- Capex timing: How the $52-$56 billion spend converts into capacity milestones and delivery dates.
- Margins: Gross and operating margin trends as new fabs move from startup costs to steady-state output.
- Customer mix: Visibility on AI accelerator demand from major clients and any new high-volume wins.
- Market share: Whether TSMC maintains or extends its foundry lead as competitors chase advanced nodes.
Bottom Line
TSMC is the backbone of AI hardware. It's raising prices, scaling capacity, and guiding to faster growth - all while trading at a lower multiple than the headline names it enables. If you want exposure to the AI boom with a focus on cash flows and execution, this is one of the cleanest ways to play it.
This is not financial advice.
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