In-Depth Analysis of TSMC's Fourth-Quarter Earnings Beat

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TSMC released its fourth-quarter 2024 (FY2025 Q3) results on January 9, 2026, with

, significantly beating market expectations[1]. This performance was mainly driven by:

Key Metrics	Performance Data
Fourth-Quarter Revenue	T$1,046.08 billion (+20% YoY)
December Monthly Revenue	T$678.19 billion (+20.4% YoY)
Full-Year 2025 Revenue	~T$2.7 trillion (+30%+ YoY)
Gross Margin	59%+ (All-Time High)
Net Profit Margin	43.7%

TSMC ADR (NYSE: TSM) has seen strong stock performance[0]:

Metrics	Values
Current Price	$318.01
52-Week High	$333.08
52-Week Low	$134.25
1-Year Gain	+52.62%
Market Capitalization	$1.65 trillion
P/E Ratio (TTM)	27.46x

[2].

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TSMC’s earnings beat

, which has the following key impacts on the industry chain:

According to industry reports, TSMC has

and is directing clients to its 2nm process[3]. Existing 3nm capacity is fully booked by the following orders:

Client	Projected 2026 Order Volume
NVIDIA	~510,000 CoWoS Wafers
Broadcom	150,000 Wafers
AMD	105,000 Wafers
Total	~765,000 Wafers

“Existing 3nm capacity has been fully taken up by orders for AI GPUs, cloud data centre application-specific integrated circuits (ASICs) and flagship mobile processors”[3]

• TSMC’s monthly CoWoS capacity is expected to reach 120,000-130,000 wafers by the end of 2026
• Over 85% of 2026 CoWoS capacity has been booked
• NVIDIA alone accounts for approximately 595,000 wafers of total industry capacity[2]

TSMC’s advanced packaging revenue grew from US$600 million in 2018 to US$8.4 billion in 2025, representing a

, and its share of total revenue rose from 6-7% to over 10%[4].

TSMC’s revenue structure is undergoing a

:

Period	HPC (High-Performance Computing)	Smartphones
Q1 2020	30%	49%
Q3 2025	57%	29%

This shift means that

, with smartphones taking a back seat[4].

As TSMC’s largest CoWoS client, NVIDIA continues to benefit from:

• Guaranteed access to sufficient advanced packaging capacity
• Smooth mass production of the Blackwell and Rubin platforms
• Sustained growth in demand for data center AI chips

Although Apple remains TSMC’s largest single client, its share has continued to decline:

• At the 2nm node, Apple’s share will drop to 48%, losing its dominant position for the first time in a decade[4]
• Demand for M-series chips is relatively stable, but growth momentum lags behind that of AI GPUs

, which may constrain TSMC’s near-term revenue growth potential[2].

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TSMC’s strong performance is

:

Metrics	TSM	Nasdaq 100 Index	Assessment
Forward P/E Ratio	16-26x	33x	Significant Discount
2025 EPS Growth	48%	-	High Growth
2026 Expected Growth	25-30%	-	Outperforms Market

According to Morgan Stanley’s analysis, TSMC’s valuation remains attractive even after the target price upgrade:

“The stock remains attractive at 16x or 13x our 2026/2027 average EPS”[5]

Rating Distribution	Percentage
Buy	72.7% (16 firms)
Hold	27.3% (6 firms)
Median Target Price	$357.50 (+12.4%)
Target Price Range	$330 - $400

• Goldman Sachs raised TSMC’s target price by 35%
  , emphasizing that AI will continue to drive demand[6]
• Morgan Stanley expects 30% revenue growth in 2026
  , exceeding the market consensus of 22%[5]
• 2026 EPS is expected to reach $15.43 (based on 48% growth assumption)

If TSMC’s P/E ratio converges from the current 26x to the Nasdaq 100’s 33x,

, representing a potential upside of 58%[6].

SMH (VanEck Semiconductor ETF), a representative ETF for the semiconductor sector, has a performance that confirms the sector’s prosperity:

Metrics	TSM	NVDA	SMH
Gain Since October 2025	+16.5%	+10.2%	+8.3%
1-Year Gain	+52.6%	+118.5%	+57.5%
Beta (vs SPY)	1.27	1.68	1.34

, reflecting the market’s positive pricing of its earnings beat.

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TSMC’s capacity expansion directly drives demand for:

Sub-Sector	Benefit Logic
Semiconductor Equipment	Full order books for ASML, Applied Materials, and KLA Corporation
High-Purity Chemicals	Advanced processes require higher material purity
Photomasks	Sustained growth in demand for advanced process photomasks
Target Materials	Increased demand for advanced packaging materials

Priority	Field	Benefit Logic
★★★★★	AI Data Centers	Priority access to CoWoS capacity, robust demand for GPUs/ASICs
★★★★☆	Premium Smartphones	Stable demand for flagship 3nm process chips
★★★☆☆	PCs/Servers	Weak demand for traditional CPUs, but AI PCs bring incremental growth
★★☆☆☆	IoT/Consumer Electronics	Mild recovery in demand for mature processes

TSMC’s leading position has differentiated impacts on competitors:

Company	Impact Analysis
Samsung Electronics	Benefiting from the memory chip (HBM) super cycle, Q4 profit is expected to triple[1]
Intel	Foundry business is under pressure, but its 18A process has secured PC orders
UMC	Intensified competition in mature processes, focusing on differentiation

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1. The “Toll Road” of AI Computing Infrastructure

“Investors are increasingly recognizing TSMC not just as a technology stock, but as the toll road of the digital economy”[4]

2. Dual-Driven Growth from Earnings Expansion and Valuation Uplift

• 2026 EPS is expected to grow by 25-30%
• Forward P/E ratio is expected to expand from 26x to 33x

3. Strong Certainty of Sector Structural Growth

• The global semiconductor market is expected to grow by 26% to US$975 billion in 2026[6]
• The AI chip market is expected to exceed US$1 trillion by 2030 (per AMD’s forecast)

Risk Category	Specific Risk	Impact Assessment
Geopolitical	Risk of escalating cross-Strait tensions	Long-term risk premium
Macroeconomic	Slowdown in AI capital expenditure	Demand-side correction
Competitive	Catch-up by Samsung/Intel	Market share loss
Valuation	Risk of chasing highs at current prices	Short-term pullback pressure
Execution	Delays in capacity expansion	Order loss

Time Horizon	Recommendation
Short-Term (1-3 Months)	Buy on dips, support level around $301-310
Medium-Term (6-12 Months)	Target price $357-400, with 12-26% upside potential
Long-Term	Core holding to benefit from AI computing growth dividends

: Billionaire investor Dan Loeb’s Third Point cut its TSMC position by 23% in Q3 2025, indicating that some institutional investors remain concerned about [7].

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TSMC’s 20% year-over-year revenue growth in the fourth quarter, which beat expectations,

. The impacts of this performance on the industry chain and valuations can be summarized as follows:

1. Industry Chain Level
   : Shortages in advanced process and packaging capacity will persist until the end of 2026; new entrants face supply chain barriers

2. Valuation Level
   : As the industry’s “toll road”, TSMC has potential for dual-driven growth from earnings expansion and valuation uplift; its current valuation still trades at a discount to the Nasdaq 100

3. Allocation Recommendation
   : As a core target in AI computing infrastructure, TSMC is worthy of gradual accumulation during pullbacks; however, close attention should be paid to geopolitical risks and valuation pullback risks

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[1] Investing.com - “TSMC posts Q4 revenue of T$1,046.08 billion, above forecasts” (https://www.investing.com/news/stock-market-news/tsmc-posts-q4-revenue-of-104608-billion-above-forecasts-4438484)

[2] Tech in Asia - “TSMC market cap tops $1.7t on AI chip demand” (https://www.techinasia.com/news/tsmc-market-cap-tops-17t-ai-chip-demand)

[3] TechNode - “TSMC slows launch of new 3nm projects, encourages clients to consider 2nm” (https://technode.com/2026/01/09/tsmc-slows-launch-of-new-3nm-projects-encourages-clients-to-consider-2nm/)

[4] SemiAnalysis - “How Apple made TSMC, and vice versa” (https://www.ped30.com/2026/01/08/apple-tsmc-semianaysis/)

[5] Finviz - “TSMC (TSM): AI Boom, Revenue Upside, and Attractive Valuation Through 2027” (https://finviz.com/news/270819/tsmc-tsm-ai-boom-revenue-upside-and-attractive-valuation-through-2027)

[6] NASDAQ - “History Says the Stock Market Could Soar in 2026” (https://www.nasdaq.com/articles/history-says-stock-market-could-soar-2026-here-1-cheap-artificial-intelligence)

[7] Benzinga - “Billionaire Investor Trims Taiwan Semiconductor As Geopolitical Risks Surge” (https://www.benzinga.com/markets/large-cap/26/01/49799821/billionaire-investor-trims-taiwan-semiconductor-as-geopolitical-risks-surge)

[0] Jinling AI - TSMC real-time quotes, financial analysis, and technical analysis data