Taiwan Semiconductor (TSM 4.96%) is a core player in the global AI boom. It's also the world's largest dedicated chip manufacturer, with approximately 70% market share. The semiconductor foundry has benefited immensely from AI-related demand and is now trading around $370 per share. From a fundamental analysis perspective, investors should ask themselves if TSMC is still a buy right now. Let's dive in and find our answer.
NYSE: TSM
Key Data Points
Hyperscalers depend on TSMC
The stock has risen exponentially amid demand from AI hyperscalers. In the past five years, the stock increased by over 170%. TSMC's forward P/E ratio is still a reasonable 25, while its PEG is around 1.5. In 2025, Taiwan Semiconductor became one of just a handful of companies to exceed $1 trillion in market capitalization.
Image source: Getty Images.
From a growth standpoint, TSMC could have a long and lucrative run as its largest customers, including Nvidia, Apple, AMD, Broadcom, and Alphabet's Google, are expected to spend exorbitant amounts on AI projects in the near future. TSMC's CEO C.C. Wei said in the fourth quarter 2025 earnings call in January that he anticipates a 25% CAGR for long-term revenue growth.
NASDAQ: NVDA
Key Data Points
In the last quarter of 2025, TSMC reported 20.5% year-over-year net revenue growth. Gross profit was up 27.2%, and earnings per share increased an even more impressive 35%. Looking ahead to 2026, the company expects demand for its products to remain strong and could pull in $35 billion in the first quarter alone.
A few manageable risks
TSMC is not without its weak spots, however. Commoditization of technology, geopolitical risk, competition, and the industry's cyclical nature are very real threats to the business. The company also plans to spend upward of $56 billion, which is a very bullish signal from TSMC itself, but if AI demand pulls back, that would be highly detrimental.
About 75% of TSMC's revenue comes from North America. If demand cools in the U.S. in particular, TSMC would be greatly hampered.
TSMC is still undervalued
TSMC has a wide competitive moat in its chips and 70% market share; Taiwan Semiconductor will remain the dominant chip foundry worldwide.
Even at $370 per share, TSMC still appears to be undervalued relative to its long-term earnings potential. The company has an exceptionally strong balance sheet. The biggest threat looks to be the geopolitical risk, but that's already well known, and the company is diversifying its production to the U.S., Germany, and Japan. Taiwan Semiconductor remains a compelling buy for at least an intermediate time horizon.
