Analysis of TSMC's Performance Surge Driven by AI Orders

Based on the comprehensive data collection above, I now present a systematic and complete analysis report for you.

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According to TSMC’s latest financial report data,

[0][1]. This ratio has risen rapidly from approximately 10% in 2024, marking TSMC’s successful transformation from a traditional smartphone chip foundry to a core supplier of AI computing infrastructure.

During the earnings conference call, TSMC management raised its growth forecast for AI accelerator revenue, expecting a compound annual growth rate (CAGR) of

for 2024-2029[1]. This means that by 2029, AI-related revenue may account for more than 65% of TSMC’s total revenue.

The High-Performance Computing (HPC) business accounted for

in Q4 2025, representing a 4 percentage point quarter-over-quarter increase from the previous quarter[1][2]. On an annual basis, the HPC business achieved in 2025, accounting for [1].

The rapid growth of the HPC business is mainly driven by:

• Strong demand for AI training and inference chips (from customers such as NVIDIA, AMD, and Broadcom)
• Data center infrastructure upgrades
• Sustained demand for computing power from large language models

:

Period	HPC Share	Smartphone Share
Q1 2024	45%	38%
Q4 2024	52%	33%
Q3 2025	57%	30%
Q4 2025	55%	32%

This shift indicates that TSMC is transitioning from a

to an , significantly enhancing the predictability and stability of its revenue[2].

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TSMC recorded

in Q4 2025, with a 1.9% quarter-over-quarter increase and approximately 20.45% year-over-year growth, exceeding the company’s previous guidance range of $32.2-$33.4 billion[0][1]. Calculated in New Taiwan Dollars (NTD), the quarter-over-quarter growth rate reached , significantly exceeding the upper limit of the company’s guidance (1% quarter-over-quarter growth)[2].

Analysis of volume-price dynamics:

• Wafer Shipment Volume
  : 3,961 thousand 12-inch equivalent wafers, down 3% quarter-over-quarter
• Average Wafer Price
  : $8,516 per wafer, up 5.1% quarter-over-quarter

This

combination indicates that TSMC is driving growth through product structure upgrades rather than pure volume expansion[2].

The company’s gross margin in the fourth quarter reached

, significantly exceeding its guidance range of 59-61% and representing a 2.8 percentage point increase from the previous quarter[0][1][2]. This level sets a new company record, driven primarily by:

1. Increasing Share of Advanced Manufacturing Processes
   : Revenue from 3nm processes rose from 23% in Q3 to 28% in Q4[1]
2. High Premium Characteristics of AI Chips
   : AI customers are price-insensitive and willing to pay a premium for advanced processes and stable production capacity
3. High Capacity Utilization
   : Advanced process production capacity remains fully loaded

The company has raised its

, reflecting confidence in the sustainability of AI demand[2].

Net profit for Q4 2025 is expected to reach approximately

, representing 27% year-over-year growth and marking the eighth consecutive quarter of profit growth[2]. The company’s EPS was $3.09, exceeding market expectations of $2.82 by 9.57%[0].

Key profitability indicators continue to improve:

• Net Profit Margin
  : 43.70% (TTM)[0]
• Operating Profit Margin
  : 49.51% (TTM)[0]
• Return on Equity (ROE)
  : 34.52% (TTM)[0]

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TSMC’s leading position in advanced manufacturing processes has been further consolidated. The wafer revenue structure for Q4 2025 is as follows[1]:

Process Node	Q3 2025	Q4 2025	Change
3nm	23%	28%	+5pct
5nm	37%	35%	-2pct
7nm	14%	14%	Flat
Total Advanced Processes (7nm and below)	74%	74%	—

:

• Entered high-volume production in Q4 2025[1]
• N2P and A16 processes are scheduled for mass production in the second half of 2026
• 2026 capital expenditure has been significantly raised to
  $52-$56 billion
  , an increase of $11-$15 billion compared to 2025[2]

CoWoS (Chip-on-Wafer-on-Substrate) is a key packaging technology for current mainstream AI chips (NVIDIA, AMD, TPU). TSMC holds

in CoWoS[2].

[2][3]:

Period	Monthly Capacity (thousand units)	Annual Shipment Volume (thousand units)	Year-over-Year Growth
2023	~3	~30	—
2024	~5	~50	+67%
2025	~7	~62	+24%
2026E	~12	~110	+77%
2027E	~15	~160	+45%

Revenue contribution from advanced packaging will rise from approximately 8% in 2025 to

in 2026[1]. This segment has become TSMC’s second growth curve.

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TSMC is reducing its over-reliance on a single customer, forming a multi-core structure of

[2]:

Customer	2023 Share	2025 Share	2026E Share
Apple	~22%	~20%	~19%
NVIDIA	~5-10%	~18%	~22%
Other AI Customers (AMD, Broadcom, etc.)	~5%	~12%	~15%
Other Customers	~65%	~50%	~44%

Bernstein expects NVIDIA’s share of TSMC’s revenue to reach

in 2025-2026, approaching Apple in scale[2].

Compared to traditional smartphone customers, AI customers have significant advantages:

1. Reduced Seasonality
   : AI infrastructure investment continues throughout the year with no obvious seasonal fluctuations
2. Low Price Sensitivity
   : Computing power equals competitiveness, so customers are willing to pay a premium
3. High Order Visibility
   : Cloud computing vendors typically sign long-term contracts
4. Shared R&D Costs
   : AI chip developers are willing to share the R&D costs of advanced manufacturing processes

This change in customer structure has led to

and [2].

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TSMC has provided strong guidance for 2026[1][2]:

Indicator	Guidance
Revenue Growth	Approximately 30% year-over-year (in USD)
Q1 2026 Revenue	$34.6-$35.8 billion (4% quarter-over-quarter, 38% year-over-year)
Q1 Gross Margin	63%-65%
Capital Expenditure	$52-$56 billion
Dividend Per Share	At least NT$23

The company expects to achieve

, which is extremely rare in the semiconductor industry[2].

Based on the DCF valuation model[0]:

Scenario	Intrinsic Value	Upside from Current Price
Conservative	$1,804.57	+421.8%
Base Case	$2,019.85	+484.1%
Optimistic	$2,694.67	+679.2%
Weighted Average	$2,173.03	+528.4%

The current share price of $345.83 corresponds to an expected 2026 price-to-earnings ratio of approximately

, which remains attractive for this leading company at the core of advanced AI manufacturing processes[2].

• Trend
  : In an uptrend (breakout pending confirmation), buy signal appeared on 01/15[0]
• Key Price Levels
  :
  • Support: $326.59
  • Resistance: $351.33
  • Next Target: $360.98
• RSI
  : In the overbought zone (overbought_risk), with potential short-term pullback pressure[0]

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1. Qualitative Change in Revenue Structure
   : HPC/AI revenue share rose from 45% in 2024 to 58% in 2025, becoming the largest revenue source
2. Elevated Gross Margin Central Level
   : From a historical average of 53% to over 60%, with the long-term target raised to 56%
3. Enhanced Growth Sustainability
   : AI infrastructure investment cycle (3-5 years) replaces consumer electronics seasonal fluctuations
4. Reshaped Valuation Logic
   : Transition from a cyclical chip stock to an AI computing infrastructure asset

• Uncertainty in Tariff Policies
  : Tariff policy risks mentioned by management may impact demand[1]
• Gross Margin Dilution from Overseas Factories
  : 2-3% dilution in the initial stage, 3-4% in the later stage
• 2nm Process Ramp-Up Risks
  : Initial capacity expansion may cause yield fluctuations
• Competitor Catch-Up
  : Progress in advanced processes by Intel and Samsung may alter the competitive landscape

: Buy (72.7% of analysts have given a Buy rating)[0]

: $377.50 (Wall Street consensus), with some optimistic targets reaching $410[0]

: TSMC is a core beneficiary of the AI super cycle. The increase in AI order share brings not only short-term performance growth but also a business model transformation into a high-growth, high-margin, high-certainty asset. The current valuation corresponds to a 2026 P/E ratio of 22-24x, and relative to its industry position, growth prospects, and profitability, it still has [2].

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[0] Jinling API Data - TSMC Company Profile, Financial Analysis, DCF Valuation, Technical Analysis

[1] MarketBeat - “Taiwan Semiconductor Manufacturing Q4 Earnings Call Highlights” (https://www.marketbeat.com/instant-alerts/taiwan-semiconductor-manufacturing-q4-earnings-call-highlights-2026-01-15/)

[2] Sina Finance - “TSMC: The Real Big Shot in AI, Who Could Refuse?” (https://k.sina.com.cn/article_5953740931_162dee08306702kuy4.html)

[3] Zhitong Finance - “Booming AI Demand Drives TSMC’s Performance! Q4 Net Profit Expected to Surge 27% to a New High” (https://finance.sina.com.cn/stock/hkstock/ggscyd/2026-01-12/doc-inhfzqaw0040572.shtml)