Is TSM a good stock to buy? We came across a bullish thesis on Taiwan Semiconductor Manufacturing Company Limited on Value & Momentum Portfolio’s Substack. In this article, we will summarize the bulls’ thesis on TSM. Taiwan Semiconductor Manufacturing Company Limited’s share was trading at $326.11 as of March 26th. TSM’s trailing and forward P/E were 31.87 and 24.15 respectively according to Yahoo Finance.
Taiwan Semiconductor Manufacturing Company (TSMC) is the global leader in semiconductor foundry services, producing advanced integrated circuits for high-performance computing, smartphones, IoT, automotive, and digital electronics. Its moat is anchored in technological leadership, with over 75% of wafer revenue from nodes at seven nanometers or below, and its two-nanometer process entering high-volume manufacturing in late 2025.
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The company benefits from massive scale, network effects, and high switching costs, locking in major customers like Apple, Nvidia, and AMD years in advance. TSMC’s pricing power is evident, with wafer prices rising 20% year-over-year and gross margins maintained above 56% despite capital-intensive expansion, which includes $180 billion planned over three years.
Despite this dominance, risks remain. Over 70% of production is in Taiwan, creating geopolitical concentration risk, while massive capital expenditures, overseas fab ramp-ups, and the N2 node transition may temporarily compress margins. AI spending drives growth, but any slowdown could impact the company’s high-performance computing revenue, while trade tensions, currency fluctuations, and competitive shifts represent additional downside risks.
Financially, TSMC is exceptionally strong, delivering ROIC of 28–32% and a value creation spread of roughly 19%, with earnings per share doubling from $1.44 in Q4 2023 to $3.14 in Q4 2025. The stock trades at $341, near its probability-weighted fair value, offering modest upside versus analyst targets ranging from $370 to $450. .
Key catalysts for rerating include AI demand acceleration, gross margin outperformance on N2, geographic diversification lowering the cost of capital, and dividend growth. Conversely, deceleration in AI spending, escalating tariffs, or geopolitical escalation could materially compress value. Overall, TSMC presents a compelling long-term investment, combining structural technological dominance, scale advantages, robust cash flow, and significant upside potential if key growth and operational catalysts materialize.
Previously, we covered a bullish thesis on Taiwan Semiconductor Manufacturing Company Limited (TSM) by Oguz Erkan in April 2025, which highlighted the company’s market dominance, advanced node leadership, and AI-driven growth potential. TSM’s stock price has appreciated by approximately 109.25% since our coverage. Value & Momentum Portfolio shares a similar view but emphasizes TSM’s structural moat, capital intensity, and rerating catalysts, providing a more detailed risk and upside assessment.
Taiwan Semiconductor Manufacturing Company Limited is on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 224 hedge fund portfolios held TSM at the end of the fourth quarter which was 194 in the previous quarter. While we acknowledge the risk and potential of TSM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TSM and that has 10,000% upside potential, check out our report about this cheapest AI stock.
Disclosure: None.
