As 2025 draws to a close, those who invested in shares of Taiwan Semiconductor Manufacturing (TSM 4.25%) at the beginning of the year would be pretty happy with their decision. After all, the foundry giant has appreciated an impressive 45% so far this year (as of Dec. 16), and that's not surprising given the robust growth in its revenue and earnings throughout the year.
Popularly known as TSMC, the Taiwan-based company is playing a critical role in the global artificial intelligence (AI) chip market. Not surprisingly, analysts are upbeat about TSMC stock's prospects in the coming year. Let's check out the company's catalysts for 2026 and find out how much upside investors can expect from TSMC stock in the new year.
Image source: TSMC.
Investors can expect TSMC's growth to accelerate in 2026
TSMC's financial performance improved this year. The company's revenue in the first 11 months of the year jumped by 33% from the same period last year. Consensus estimates project a 48% spike in its earnings for 2025 to $10.42 per share. Those numbers will be an improvement over last year, when TSMC recorded a 36% spike in earnings on a 30% jump in revenue to just over $90 billion.
NYSE: TSM
Key Data Points
Analysts, however, expect TSMC's growth to slow down in 2026. Consensus estimates point toward a 20% increase in revenue and earnings next year. However, there is ample evidence indicating that it could ultimately perform much better than that.
The first major reason why TSMC's growth rate in 2026 could accelerate is its improving advanced chip packaging capacity. Equity research and brokerage firm Bernstein expects TSMC's advanced chip packaging chip-on-wafer-on-substrate (CoWoS) capacity to hit 125,000 wafers per month by the end of 2026.
That points toward a terrific increase of around 66% from TSMC's current CoWoS capacity of 75,000 wafers. Importantly, the higher capacity that TSMC is set to bring online throughout next year is said to be fully booked out, as reported by market research firm TrendForce. This isn't surprising as the foundry giant needs to fulfill orders for AI and high-performance computing (HPC) chips from companies like Nvidia (NVDA 1.28%), Amazon, MediaTek, Google, and others.
TSMC's customers, which also include Broadcom, Marvell, Apple, and others, have been experiencing robust demand for their devices and AI chips. Nvidia, for instance, still has a massive order backlog of around $307 billion that it needs to fulfill over the next five quarters. That's well above Nvidia's trailing-12-month revenue of $187 billion.
Moreover, Nvidia has been cleared by the Trump administration to sell its advanced H200 data center graphics processing units (GPUs) to Chinese customers. This could help the chipmaker land more orders for its chips in 2026 and ensure that the additional capacity that TSMC is bringing online is indeed sold out.
So, the substantial increase in TSMC's advanced chipmaking capacity should translate into a much bigger jump than the 20% top-line increase that analysts forecast for next year. Another important thing worth noting is that TSMC will likely hike the prices of its various process nodes next year. TrendForce points out that TSMC could hike the prices of its advanced chip nodes, which are used for manufacturing AI chips, by 3% to 5% next month.
Other estimates indicate that there may be a price hike of up to 10% for TSMC's advanced chip nodes. Also, the new 2-nanometer (nm) process node that TSMC will start producing next year is expected to carry a 10% to 20% premium over the existing flagship, the 2nm node. Therefore, it won't be surprising to see TSMC's earnings growing at a much faster pace than the 20% increase that analysts expect next year, and that could set this semiconductor stock up for terrific gains.
Here's how much upside investors can expect next year
TSMC carries a 12-month median price target of $355, according to 50 analysts covering the stock. That suggests 23% gains from current levels. However, TSMC can easily beat that median price target in 2026.
We have already seen why the company is on track to exceed Wall Street's revenue and earnings growth estimates for next year. Assuming its earnings jump by 40%, as compared to the consensus estimate of 20% in 2026, its bottom line could hit $14.59 per share (based on the 2025 earnings estimate of $10.42 per share). If TSMC trades at 33 times earnings after a year, in line with the tech-laden Nasdaq-100 index, its stock price could hit $481. That would represent a 67% increase from current levels.
Investors looking to buy an AI stock that can make them richer in 2026 can consider taking a closer look at TSMC before it soars higher.
