Taiwan Semiconductor Manufacturing (TSM): A Bull Case Theory 

We came across a bullish thesis on Taiwan Semiconductor Manufacturing Company Limited on Nikhs’s Substack. In this article, we will summarize the bulls’ thesis on TSM. Taiwan Semiconductor Manufacturing Company Limited’s share was trading at $287.68 as of December 1st. TSM’s trailing and forward P/E were 29.81 and 23.92 respectively according to Yahoo Finance.

TSMC has mastered the art of turning conservative guidance into a strategic advantage, consistently sandbagging expectations and then exceeding them to reinforce market trust while concealing its true dominance. Sub-7nm chip production is effectively monopolized, with major customers like Apple and Nvidia pre-committing years of capacity at steep premiums, giving TSMC unparalleled pricing power. This controlled scarcity ensures margins remain protected even as the company expands geographically, such as the Arizona fabs, where high construction costs create the illusion of margin dilution.

Yet quarterly results consistently beat guidance, with Q3 2025 gross margins reaching 59.5%, underscoring that even cautious management forecasts cannot hide the company’s strength. AI-driven demand has transformed traditional semiconductor cycles into predictable, high-commitment streams, as customers pre-pay for exponential compute growth, reinforcing TSMC’s leverage and enabling sustained price increases per wafer. Advanced packaging constraints, including CoWoS bottlenecks, further amplify scarcity, encouraging long-term customer commitments and deeper dependence.

The company’s strategic approach generates multiple upside scenarios: base-case revenue growth of 15–16% with mid-50s margins, a bull case with AI demand breaking all models and revenue growth above 20%, or even a bear case where margin dilution occurs but the company still maintains high profitability and growth. Across all scenarios, TSMC’s dominance remains intact, highlighting the “Chang Doctrine”: true strength allows a company to guide conservatively, deliberately undersell resilience, and quietly control the market.

While the stock is still priced like a cyclical player, TSMC operates as a monopoly infrastructure provider, creating a unique investment narrative where upside remains largely unrecognized. This combination of pricing power, customer lock-ins, and strategic scarcity positions TSMC as the defining semiconductor monopoly of its era.

Previously we covered a bullish thesis on Taiwan Semiconductor Manufacturing Company Limited (TSM) by Stock Whisperer in May 2025, which highlighted strong technical momentum, attractive valuation, and leadership in AI-driven chip manufacturing. The stock has appreciated approximately 49.84% since our coverage as the thesis played out amid growing demand. Nikhs shares a similar perspective but emphasizes TSMC’s deliberate underestimation of guidance and strategic scarcity to reinforce market dominance.

Taiwan Semiconductor Manufacturing Company Limited is on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 187 hedge fund portfolios held TSM at the end of the second quarter which was 187 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.

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Disclosure: None.