Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) closed at $422.25 on October 15. The stock has returned 16.21% over the last six months, compared to a 15.4% return for the Insider Monkey Billionaire Index and 11.4% for the State Street SPDR S&P 500 ETF Trust.
Taiwan Semiconductor does not design chips. It builds them for the companies that do. Nvidia, Apple, Broadcom and most of the names associated with artificial intelligence send their designs here and take finished silicon away.
That makes it the one company in the industry almost nobody can route around. It reported third-quarter results on October 15, and they were the strongest in the company’s history.
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The Quarter Beat Its Own Guidance:
Revenue came to $46.72 billion, above the range management had guided to three months earlier. Net profit rose 68.7%, faster than revenue did. Profit rose faster than revenue did. For a company whose costs are mostly the factories themselves, that gap is what appears when the plants run full.
The margin is the detail worth holding onto. Gross margin reached 66.4% while the company was starting mass production on its newest process. A new process normally costs margin before it earns any, because yields begin low and the equipment is paid for whether it produces or not.
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What a Record Quarter Does Not Settle:
The customer list is the risk and the strength at once. A handful of companies account for an enormous share of the advanced capacity, and their spending plans are set a year or more ahead of the orders reaching Taiwan.
Then there is the thing no spreadsheet handles. The company’s most advanced plants sit on an island whose political status is disputed, and no amount of capacity built in Arizona or Japan changes where the centre of gravity is today.
What You Pay for the Quarter:
The shares change hands at 21.41 times what analysts expect next year, against 33.67 times what the company actually earned. The gap is the market pricing in another large step up in profit, which is the same thing the quarter just delivered.
What that price buys is a position almost nobody can go around, attached to a customer list that can change its mind. The multiple is not demanding for the growth. It is demanding of the assumption that the spending behind it keeps coming.
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Conclusion:
The quarter did the most a quarter can do. Revenue beat the guidance, margins held through a difficult process change, and the outlook went up rather than down. None of that answers whether the customers keep spending at this pace, and the investment case runs mostly through their budgets rather than through anything the company controls. Watch what the designers say about next year, because that is what fills these factories.
Market Sentiment:
Taiwan Semiconductor Manufacturing Company Limited was held by 249 hedge funds with a combined stake value of about $50.48 billion at the end of Q2 2026 in the Insider Monkey database. This is up from 234 hedge fund holders with a cumulative investment value of around $39.22 billion in the previous quarter.
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This article is originally published at Insider Monkey.
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