The semiconductor industry is poised for another year of terrific growth in 2026, and one of the best ways to capitalize on the sunny prospects of this market is by investing in Taiwan Semiconductor Manufacturing (TSM +5.31%), the world's largest semiconductor foundry.
Popularly known as TSMC, shares of the foundry giant have registered impressive gains of 59% on the market in the past year. It won't be surprising to see TSMC stock head higher in 2026 as semiconductor sales are anticipated to accelerate in the new year. World Semiconductor Trade Statistics (WSTS) estimates a 26.3% spike in the semiconductor industry's revenue this year, an increase of almost 4 points from 2025's growth.
This could translate into stronger growth for TSMC in the new year, as it manufactures chips designed by the world's leading chip designers and deployed in a wide variety of applications. TSMC stock should get a nice boost when it releases its fourth-quarter 2025 results on Jan. 15. Let's see why that may be the case.
Image source: TSMC.
TSMC's market share gains and capacity expansion point toward a stronger-than-expected outlook
TSMC recently released its December revenue report, posting a 20.4% year-over-year jump in its top line for the month. The chip giant's revenue landed slightly ahead of what analysts anticipated.
TSMC's December revenue means that its top line jumped by 31.6% in 2025 in New Taiwan Dollars. The company grew at a faster pace than the semiconductor market did last year. That isn't surprising, as TSMC has been capturing a larger share of the Foundry 2.0 market, which encompasses chip manufacturing, assembly, and testing.
Counterpoint Research estimates that TSMC's Foundry 2.0 market share increased by 6 percentage points year over year in the third quarter of 2025 to 39%. It was the fastest-growing player in this space during the quarter, and by a big margin. The next fastest-growing Foundry 2.0 player was Texas Instruments, which saw a 14% year-over-year increase in revenue, compared to the 41% jump clocked by TSMC in Q3 revenue.
The dominant position that TSMC enjoys in the Foundry 2.0 market can be attributed to its cutting-edge semiconductor manufacturing nodes as well as the company's focus on aggressive capacity expansion to support the healthy demand for artificial intelligence (AI) chips. For instance, the company reportedly aims to increase its monthly advanced packaging capacity, which is crucial for manufacturing AI chip systems, to 120,000-130,000 wafers by the end of the year, as compared to 75,000-80,000 wafers monthly at the end of 2025.
NYSE: TSM
Key Data Points
Additionally, third-party reports expect TSMC's 2-nanometer (nm) production capacity to double by the end of 2026 as compared to last month. The company is building new capacity at a more aggressive pace right now, which is not surprising considering it is overwhelmed by demand. TSMC's 2nm production capacity is reportedly sold out for the year, and any new capacity it brings online should ideally help it fulfill more orders.
Moreover, TSMC has reportedly been asked by Nvidia (NVDA +3.45%) to ramp up the production of the latter's H200 data center chips to support orders from China. According to a Reuters exclusive report, Chinese tech companies have reportedly placed orders for 2 million of Nvidia's advanced H200 processors, which are 6 times more powerful than the H20 chip it was earlier selling in that market.
The report notes that Nvidia currently has 700,000 H200 chips in stock, indicating that TSMC will need to expand production to meet the demand. TSMC is expected to ramp up output for Nvidia's H200 chips starting in the second quarter.
The points discussed above suggest that TSMC's revenue growth in 2026 could accelerate, and that's precisely why its shares are likely to jump following its quarterly report on Jan. 15.
TSMC could easily top analysts' expectations
Analysts were expecting an 18% increase in TSMC's revenue in the fourth quarter of 2025 to 1.02 trillion New Taiwan Dollars. We have already seen that the company has done better than that. Consensus estimates are projecting an acceleration in TSMC's growth rate in the first quarter of 2026 to 22%.
However, its aggressive capacity expansion, improving market share, the reopening of another revenue stream in the form of Nvidia's Chinese business, and the stronger growth of the semiconductor industry this year should allow it to easily surpass analysts' estimates. Moreover, the full-year revenue growth estimate for TSMC stands at 23.3%, which points toward a deceleration over the 31.6% top-line growth it delivered in 2025.
But there is ample evidence suggesting that TSMC's growth could be much higher than that. So, don't be surprised to see management calling for a much stronger increase in TSMC's revenue this year when it releases its earnings next week. That's why investors can consider buying this semiconductor stock before Jan. 15, especially considering that it has the potential to deliver impressive upside to investors in 2026.
