Taiwan Semiconductor Manufacturing Co. (TSM +5.29%) has reported first-quarter 2026 revenue of roughly $36 billion, up about 35% year over year.
The results surpassed expectations, highlighting that artificial intelligence (AI)-driven demand remains exceptionally strong. March revenue alone surged 45%, reinforcing that spending on AI infrastructure is not slowing despite geopolitical tensions and supply chain concerns.
Image source: Getty Images.
With revenue already reported and the company's first-quarter fiscal 2026 earnings release scheduled for April 16, investors might want to consider buying the stock now. TSMC's results are likely to confirm whether the current AI spending cycle is accelerating or beginning to normalize.
If you have $5,000 not required for bills or contingencies, here's why TSMC stock could be a smart buy now.
Largest foundry in the world
TSMC accounts for nearly 72% of the global foundry market and manufactures advanced chips for nearly every major AI player, including Nvidia, Apple, and Advanced Micro Devices.
NYSE: TSM
Key Data Points
This positioning is visible in the company's revenue mix. High-performance computing (HPC), including AI workloads, accounted for 58% of total revenue in 2025. Management expects the company's 2026 capital expenditures (capex) to be in the range of $52 billion to $56 billion, up significantly from $40.9 billion in 2025. The company plans to allocate 70% to 80% of its 2026 capex to advanced process technology nodes including 3nm and 2nm.
With big technology companies expected to spend as much as $720 billion on AI projects in 2026, TSMC is well-positioned to benefit from sustained growth across HPC, AI, and 5G applications. The company's 3nm chips accounted for 24% of TSMC's 2025 wafer revenue. The company has also begun volume production of its 2nm chips, which have demonstrated a performance and efficiency advantage for next-generation AI workloads.
Additionally, chip on wafer on substrate (CoWoS) technology -- an advanced technology used to package multiple small chips into a larger chip -- is seeing rapid demand growth. According to Paul Rousseau, TSMC North America packaging solutions head, the CoWoS business is currently growing at a compound annual growth rate of 80%.
Capacity at TSMC is reportedly so overbooked that the company has outsourced some simpler processes to third-party companies. The company is also aggressively expanding packaging capacity in Arizona and Taiwan to address the explosive demand. According to industry estimates, TSMC plans to increase monthly CoWoS capacity to as high as 130,000 wafers by the end of 2026.
Risks and valuation
TSMC remains exposed to geopolitical disruptions, not just in Taiwan but across the broader global supply chain. The ongoing Iran conflict has already disrupted imports critical to semiconductor manufacturing, such as oil, liquefied natural gas, and helium. Analysts warn that prolonged disruptions could increase production costs across the semiconductor manufacturing industry.
TSMC stock trades at 30 times earnings, which is lower than the semiconductor industry's median price-to-earnings multiple of around 39. This suggests that even after its recent rally, the stock does not fully reflect the scale of the long-term AI opportunity. I think the stock is a buy.
