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Taiwan Semiconductor Manufacturing (TSM) stock ticked higher last week as investors digested bullish projections for the chip giant’s artificial intelligence revenue trajectory, with analysts outlining a clear path to $90 billion in AI-driven sales by 2029.
Needham analyst Charles Shi upgraded his price target for TSMC stock to $270 from $225, maintaining a “Buy” rating on the world's largest contract chipmaker. His analysis suggests that TSMC can achieve its ambitious AI revenue target without requiring dramatic volume increases, instead relying on higher silicon content per package and custom high-bandwidth memory solutions.
TSMC's 2-nanometer technology remains on track for volume production in the second half of 2025, positioning the chipmaker to capitalize on the demand for next-generation AI chips. The foundry expects to double both its AI-related revenue and chip-on-wafer-on-substrate (CoWoS) packaging capacity in 2025.
While Shi warns of potential headwinds in 2026 due to slower AI accelerator volumes, he projects a strong recovery with nearly 40% growth in 2027 and 45% in 2028 as advanced architectures drive higher silicon content requirements.
A Strong Performance in Q1 2025
Taiwan Semiconductor Manufacturing delivered strong first-quarter results that exceeded profit expectations. A solid Q1 performance reinforces its position as the world’s leading contract chipmaker amid surging demand for artificial intelligence. The foundry giant reported net income of $10.97 billion, beating estimates and marking a remarkable 60% increase from the previous year.
Revenue climbed 41.6% year-over-year to $25.50 billion, slightly surpassing analyst forecasts. The standout performance was driven by TSMC’s high-performance computing division, which encompasses AI and 5G applications, accounting for 59% of total revenue with a 7% quarterly increase. Advanced technologies of 7-nanometer and below represented 73% of total wafer revenue, highlighting the company’s technological leadership.
TSMC has also demonstrated strategic foresight by expanding its U.S. operations. It announced an additional $100 billion investment in Arizona facilities, bringing total U.S. commitments to $165 billion. This expansion will enable approximately 30% of TSMC’s 2-nm and other more advanced capacity to be manufactured within the U.S., addressing geopolitical concerns while serving major American clients.
Early indicators suggest that 2-nm adoption will exceed both 3-nm and 5-nm technologies during their initial years, driven by smartphone and high-performance computing applications. TSMC expects to double both its AI-related revenue and CoWoS packaging capacity in 2025.
Looking ahead, gross margins are expected to face pressure from overseas facility startup costs, with an anticipated decline from 58.8% to approximately 58% in the second quarter. Nevertheless, TSMC maintained its full-year revenue growth forecast of approximately mid-20%, underscoring its confidence in sustained AI demand.
The company’s strategic positioning in cutting-edge manufacturing technology and geographic diversification should support long-term growth as artificial intelligence reshapes the semiconductor landscape.
Is TSM Stock Still Undervalued?
Analysts tracking the semiconductor stock expect it to increase sales from $87.88 billion in 2024 to $170.3 billion in 2027. Comparatively, adjusted earnings are forecast to expand from $7.04 per share to $12.92 per share in this period.
If TSM stock is priced at a forward earnings multiple of 25x, it should trade around $325 in early 2027, roughly 40% above the current trading price. Out of the 11 analysts covering TSM stock, eight recommend “Strong Buy,” two recommend “Moderate Buy,” and one recommends “Hold.” The average target stock price for TSM is $243.75.
