TLDR
- TSMC stock has nearly doubled since early April 2025, recovering from concerns over U.S.-China tensions that weighed on shares during winter months.
- The chipmaker reported Q2 2025 revenue of $30.07 billion, up 44.4% year-over-year, with a gross margin of 58.6%.
- High-performance computing (primarily AI chips) accounted for 60% of TSMC’s Q2 revenue, benefiting from hyperscaler data center buildouts.
- Morgan Stanley raised its price target to NT$1,588 from NT$1,388, the highest on Wall Street, expecting TSMC to beat Q4 2025 guidance.
- The bank increased CoWoS capacity estimates to 100,000 by 2026 and predicts a 5% price hike for 3nm wafers due to supply shortages.
The past six months have painted a rosy picture for Taiwan Semiconductor Manufacturing Company. The world’s leading chipmaker has been riding an AI wave that shows no signs of breaking.
The journey hasn’t been entirely smooth. During the winter months, TSM shares took a hit as markets fretted over escalating U.S.-China tensions and trade uncertainties.
Spring and summer told a different story. The stock nearly doubled from its early April low, fueled by relentless demand from hyperscalers building out their AI infrastructure.
The company’s Q2 2025 earnings proved the rally wasn’t hot air. Revenue hit $30.07 billion, representing a 44.4% jump from the previous year.
Even more impressive was the 58.6% gross margin. That’s the kind of profitability that makes investors sit up and pay attention.
High-performance computing, which is code for AI chips, drove 60% of Q2 revenue. Nearly all AI chips used in data center infrastructure come from TSMC’s factories.
Bull Case for Continued Growth
Top investor Stefon Walters, ranked in the top 2% of stock professionals tracked by TipRanks, believes the party isn’t over. His reasoning centers on projected AI infrastructure spending through 2030.
Nvidia has forecast between $3 to $4 trillion in infrastructure spending by decade’s end. As the dominant player in chip manufacturing, TSMC stands to capture a meaningful slice of that pie.
Morgan Stanley shares the optimistic outlook. The investment bank raised its price target to NT$1,588 from NT$1,388, the highest estimate on Wall Street.
The firm expects TSMC to beat its Q4 2025 revenue and gross margin guidance. Strong AI demand and stable foreign exchange rates support this view.
Capacity Expansion and Pricing Power
Morgan Stanley increased its CoWoS capacity estimate to 100,000 by 2026, up from 90,000 previously. Nvidia’s upcoming Rubin chip will consume 3nm wafers, adding to demand pressures.
The bank’s analysts sense a pull-in from Nvidia’s networking chip schedule. This has created a shortage in TSMC’s 3nm wafer supply.
That shortage could translate into pricing power. Morgan Stanley predicts TSMC may hike 3nm wafer prices by at least 5% in 2026.
Customers are embracing TSMC’s advanced 2nm, A16, and A14 technologies for better energy efficiency. Apple’s iPhone 18 models are expected to adopt 2nm chips in 2026.
Nvidia’s Feynman chip may use the A16 process in 2028. Intel is also engaging with TSMC for A14 outsourcing, according to Morgan Stanley’s checks.
The investment bank raised its 2026 and 2027 earnings estimates by 10% and 14.8% respectively. It now projects 2025 revenue up 33% year-over-year in U.S. dollar terms.
Morgan Stanley expects Q4 2025 revenue to be flat to up quarter-on-quarter. That’s better than the Street’s forecast of a 5% to 10% decline.
Wall Street consensus remains firmly bullish. Seven analysts rate TSM a Buy, with one Hold rating, resulting in a Strong Buy consensus.
The 12-month average price target sits at $285.50. That implies roughly 5% upside from current levels.
