What is TSMC's (TSM) current rating and price target?

VM Genius rates TSM Buy (Overweight) with a 12-month price target of $500. The stock trades at $398.37 (Jul 17 close), implying +25.5% upside. Consensus across 18 analysts is Strong Buy with an average PT of $520 (range $354-$700, median $513).

How did TSMC perform in 2Q 2026?

2Q26 revenue was US$40.20B (NT$1,270.38B, +33.7%/+36.0% YoY) at the top of guidance; gross margin 67.7% and operating margin 60.3% both beat the top of guidance and set records; net income to parent was NT$706.56B and EPS NT$27.25. But net income/EPS include a one-time gain on selling 8.1% of Vanguard (VIS); the clean net margin is about 50.9% and clean EPS about NT$24.9.

Why should this quarter's +77% net income growth be discounted?

Non-operating items of NT$95.83B were far above the normal ~NT$29B; the excess of about NT$67B (pre-tax) is primarily the gain on selling 8.1% of VIS on 2026-05-15. Stripping it out, the +77.4% headline is lifted by roughly 7 points. The sustainable read is the 60.3% operating margin and +16.3% QoQ operating-income growth.

Why Buy instead of Hold?

AI/HPC is now 66% of revenue and up +20% QoQ, the only strong driver; the 60.3% operating margin is a record, advanced nodes (<=7nm) are 77% of revenue, and 2nm is in its first ramp; net cash is about NT$2.65T and annualized ROE 45.9%. At 18.8x FY27E forward P/E (PEG ≈ 1.0), a near-monopoly picks-and-shovels play to AI is not expensive, and the stock is still below the $520 consensus and our $500.

What are TSMC's key risks?

(1) an AI-capex peak hitting the 66% HPC platform; (2) surging CapEx (+41% QoQ this quarter) pressuring free cash flow (down to NT$287B); (3) geopolitics — cross-strait risk, U.S. export controls, and tariffs; (4) a stronger Taiwan dollar eroding USD revenue translation; (5) 2nm ramp or yield disappointing.

How is the $500 price target derived?

A three-path weighting: FY27E P/E (EPS $21.24 × 24x = $510, 45% weight), FY26E P/E (EPS $17.05 × 27x = $460, 25%), and Street consensus ($520, 30%), weighting to $500. The Bear $350 / Base $500 / Bull $620 scenarios weight to about $493, consistent with the target, with bull > spot > bear.

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Post-earnings deep dive · Information Technology · Foundry leader

Taiwan SemiconductorNYSE:TSM

Produced by: VM Genius

Published 2026-07-20, with market data as of the 2026-07-17 close. All operating figures are sourced from TSMC's official 2Q 2026 earnings conference materials (2026-07-16); price and consensus are from Yahoo Finance.

TSMC is the undisputed leader in advanced-node foundry and the “picks-and-shovels” supplier to AI compute. Q2 revenue of US$40.20B (+33.7% YoY) reached the top of guidance, while a 67.7% gross margin and 60.3% operating margin both beat the top of guidance and set records; HPC/AI is now 66% of revenue, and 2nm entered its first ramp quarter.

We rate TSM Overweight (Buy) with a 12-month price target of $500, about 25% above the current $398.37. One caveat: this quarter's net income and EPS were lifted by a one-time gain on the sale of Vanguard (VIS) shares — the 60.3% operating margin is the sustainable read.

Rating

Buy

Confidence: Medium-High

12-Month Price Target

$500

+25.5% vs $398.37

Current Price

$398.37

Jul 17 close · MCap $2.07T

Street Consensus

$520

Strong Buy · 18 analysts · range $354-$700

2Q26 Rev

US$40.20B

2Q26 Op Margin

60.3%

2Q26 EPS

NT$27.25

Fwd P/E (FY27E)

18.8x

52W Range

$223.70-$479

Net Cash

NT$2.65T

ROE (ann.)

45.9%

Adv. ≤7nm

77%

§01Investment Summary

The thesis on TSMC is simple: nearly every advanced AI chip in the world — from Nvidia and AMD to Apple and Broadcom — is manufactured at this one company. It is the most certain “picks-and-shovels” play in the AI arms race, with essentially no real competitor at the leading edge. Q2 confirmed that pricing power: revenue reached the top of guidance, and both gross and operating margins beat the top of guidance and set records.

Conclusion: Overweight (Buy), medium-high conviction. 12-month price target $500, about +25% above the current $398.37.

Four reasons to buy: (1) AI/HPC is now 66% of revenue, up +20% QoQ and the only strong driver this quarter; (2) a record 60.3% operating margin, with advanced nodes (≤7nm) at 77% of revenue, shows pricing power converting to profit; (3) 2nm (N2) entered its first ramp quarter, adding a fresh volume-and-price layer for 2026-2027; (4) a fortress balance sheet with ~NT$2.65T net cash and a 45.9% annualized ROE.

Key caveat: this quarter's net income/EPS were lifted by a one-time gain on the Vanguard (VIS) sale, so valuation should anchor on operating income and forward EPS, not this quarter's GAAP net income.

图 1：TSM ADR 关键价格锚点。现价 $398.37 处 52 周区间偏上（较低点 +78%），仍低于 VM 目标价 $500 与共识均值 $520。 — Figure 1: TSM ADR key price anchors. Spot $398.37 sits in the upper half of the 52-week range (+78% off the low), still below the VM target of $500 and the $520 consensus mean.

Figure 1: TSM ADR key price anchors. Spot $398.37 sits in the upper half of the 52-week range (+78% off the low), still below the VM target of $500 and the $520 consensus mean.

§02Price and Street View

Metric	Value	Source / Note
Current price (TSM ADR)	$398.37	Yahoo Finance · Jul 17 close
Market cap	$2.07T	398.37 × 5,186.47M ADR-equiv
Local 2330.TW	NT$2,290	ADR ~12% premium to local (spot FX 32.33)
52W range	$223.70-$479	spot +78% off the low, in the upper half
Analyst PT	$354 / $520 / $700	Low / Avg / High · median $513
Consensus	Strong Buy	18 analysts · rating mean 1.42
Forward P/E	23.4x / 18.8x	FY26E $17.05 / FY27E $21.24 (consensus EPS)

TSMC has two prices: it lists in the U.S. as an ADR (NYSE:TSM, one ADR = five local shares) and in Taiwan as a local share (2330.TW). The ADR usually trades at a premium to the local shares — about 12% currently — reflecting U.S. investors' appetite for the AI theme and the convenience of USD access. This report's rating and target are in ADR (USD) terms, while operating financials follow the company's official NT$ reporting. The stock is up 78% off its 52-week low and in the upper half of the range, yet still below the $520 average target of all 18 analysts, and below our $500.

图 2：分析师目标价区间 $354-$700，均值 $520，现价 $398.37 低于均值，VM 目标价 $500。 — Figure 2: Analyst target range $354-$700, average $520; spot $398.37 is below the average, with a VM target of $500.

Figure 2: Analyst target range $354-$700, average $520; spot $398.37 is below the average, with a VM target of $500.

§03Bull/Bear View

Bull: the sole foundry for AI compute, with pricing power converting to margin

TSMC holds a near-monopoly on the most advanced nodes (5nm/3nm/2nm), manufacturing the high-end chips of Nvidia, AMD, Apple, Broadcom, and Google, with no second source able to match its yield and capacity. That exclusivity shows up directly in margins: this quarter's 60.3% operating margin set a record, the 67.7% gross margin beat the top of guidance, and advanced nodes (≤7nm) are 77% of revenue. The AI/HPC platform grew +20% QoQ to 66% of revenue and was the only strong driver — evidence that AI demand is still accelerating, not peaking. With 2nm ramping, the A13 node unveiled, and a Sony image-sensor partnership, the volume-and-price runway extends for years.

Bear: not cheap, and surging CapEx, geopolitics, and FX are hard constraints

The stock is up 78% off its 52-week low and in the upper half of its range, so the valuation is no longer cheap. Capital spending is the most direct pressure: CapEx jumped to NT$496B this quarter (+41% QoQ), pulling free cash flow down from NT$348B to NT$287B — the AI arms race requires TSMC to keep expanding capacity at huge cost, squeezing near-term FCF. A more structural risk is geopolitical: cross-strait tensions, U.S. chip-export controls on China, and potential tariffs could all disturb supply-demand and capacity footprint; meanwhile a stronger Taiwan dollar erodes the USD translation of revenue. In addition, A/R days rose to 29 and inventory days to 87 — a mild lengthening of working capital worth tracking.

Our view: this is not a “cheap” stock but a “certainty-premium” stock. TSMC's biggest moat is that it cannot be replaced, which lets the AI theme's margin and volume-price keep converting; but the market already awards it a valuation to match. At 18.8x FY27E forward P/E (PEG ≈ 1.0), for a company growing revenue +25% with a 60% operating margin and a mountain of net cash, it is not expensive — but it is not on sale either. The buy case rests on AI demand certainty + the 2nm ramp + a reasonable (not bubble) valuation; the real risks to guard against are CapEx squeezing cash flow and periodic pullbacks from geopolitics or FX.

§04Financial Truth

Q2 revenue was NT$1,270.38B (US$40.20B; +36.0%/+33.7% YoY, +12.0% QoQ), at the top of guidance. Gross margin 67.7% (guide 65.5-67.5%) and operating margin 60.3% (guide 56.5-58.5%) both beat the top of guidance and set records; operating income was about NT$766B, +16.3% QoQ and +65.4% YoY. Wafer shipments were 4,336K (12-inch equivalent), +3.9% QoQ.

One-time gain notice (valuation-critical): this quarter's “non-operating items” were NT$95.83B, well above the normal ~NT$29B (1Q26 28.83, 2Q25 29.61); the excess of about NT$67B (pre-tax) is primarily the gain on selling 8.1% of Vanguard International Semiconductor (VIS) on 2026-05-15. Stripping it out, clean net income was about NT$646B, EPS about NT$24.9, and net margin about 50.9% (the after-tax amount is not broken out in the release; this is an author estimate). So the headline net income of +77.4% YoY / +23.4% QoQ is lifted by roughly 7 points; the truly sustainable read is the 60.3% operating margin and the +16.3% QoQ growth in operating income.

Income statement (official)	2Q25	1Q26	2Q26	QoQ
Revenue (US$B)	30.07	35.90	40.20	+12.0%
Revenue (NT$B)	933.79	1,134.10	1,270.38	+12.0%
Gross margin	58.6%	66.2%	67.7%	+1.5pp
Operating margin	49.6%	58.1%	60.3%	+2.2pp
Net income (NT$B)	398.27	572.48	706.56	+23.4%
Net margin	42.7%	50.5%	55.6%*	+5.1pp
EPS (NT$)	15.36	22.08	27.25*	+23.4%
ROE (ann.)	34.8%	40.5%	45.9%	+5.4pp

* 2Q26 net margin and EPS include the one-time VIS gain; clean net margin is about 50.9% and clean EPS about NT$24.9 (author estimate).

图 3：营收与营业利润连续两季环比放量，2Q26 营业利润 NT$766B（环比 +16.3%）。 — Figure 3: Revenue and operating income grew sequentially for two quarters; 2Q26 operating income was NT$766B (+16.3% QoQ).

Figure 3: Revenue and operating income grew sequentially for two quarters; 2Q26 operating income was NT$766B (+16.3% QoQ).

图 4：毛利率/营业利润率/净利率三线齐升；毛利与营业利润率双双超指引上沿。净利率 55.6% 含一次性。 — Figure 4: Gross, operating, and net margins all rose; gross and operating margins beat the top of guidance. The 55.6% net margin includes a one-time gain.

Figure 4: Gross, operating, and net margins all rose; gross and operating margins beat the top of guidance. The 55.6% net margin includes a one-time gain.

图 5：诚实拆解——归母净利 NT$707B 中约 NT$60B 来自出售 VIS 的一次性利得；营业利润 NT$766B 才是干净经营口径。 — Figure 5: An honest split — of the NT$707B reported net income, about NT$60B is the one-time VIS gain; the NT$766B operating income is the clean operating read.

Figure 5: An honest split — of the NT$707B reported net income, about NT$60B is the one-time VIS gain; the NT$766B operating income is the clean operating read.

§05Business Mix: Advanced Nodes and the AI Platform

By process node, TSMC's revenue is heavily concentrated in the most advanced nodes: 5nm 33%, 3nm 30%, 7nm 11%, with advanced nodes (≤7nm) totaling 77%; 2nm (N2) contributed 3% for the first time this quarter, formally entering its ramp. The more advanced the node, the higher the price and the fewer the competitors — the root reason TSMC's gross margin holds in the 60s.

图 6：2Q26 营收按制程，先进制程（≤7nm）合计 77%，2nm 首季贡献 3%。 — Figure 6: 2Q26 revenue by technology; advanced nodes (≤7nm) total 77%, with 2nm contributing 3% in its first quarter.

Figure 6: 2Q26 revenue by technology; advanced nodes (≤7nm) total 77%, with 2nm contributing 3% in its first quarter.

By end platform, AI is the dominant theme: HPC (high-performance computing, including AI accelerators) is 66% of revenue and up +20% QoQ — the only strong driver this quarter; smartphones eased to 22% (-4% QoQ), while automotive (+15%) and IoT (+4%) recovered mildly. This mix shows TSMC's growth has shifted from the traditional smartphone cycle to a new one driven by AI data-center capex, whose visibility and durability far exceed consumer electronics.

图 7：2Q26 营收按平台，HPC/AI 占 66%、环比 +20%，独家拉动本季增长。 — Figure 7: 2Q26 revenue by platform; HPC/AI is 66% and up +20% QoQ, the sole driver of this quarter's growth.

Figure 7: 2Q26 revenue by platform; HPC/AI is 66% and up +20% QoQ, the sole driver of this quarter's growth.

§06Balance Sheet and Cash Flow

TSMC carries a fortress balance sheet: cash and marketable securities of NT$3,518B far exceed NT$864B of interest-bearing long-term debt, for about NT$2.65T of net cash; equity is 69.1% of assets, the current ratio is 2.5x, and annualized ROE is 45.9%. The strong balance sheet lets the company keep investing heavily through the AI arms race without financial strain, and supports steady dividends (the board approved a NT$7.00 cash dividend for 1Q26).

图 8：净现金约 NT$2.65 万亿的堡垒式资产负债表；权益占比 69.1%、流动比率 2.5x、年化 ROE 45.9%。 — Figure 8: A ~NT$2.65T net-cash fortress; equity 69.1% of assets, current ratio 2.5x, ROE 45.9% (ann.).

Figure 8: A ~NT$2.65T net-cash fortress; equity 69.1% of assets, current ratio 2.5x, ROE 45.9% (ann.).

The other side of cash flow is capex: operating cash flow hit a record NT$783B this quarter, but capital expenditures jumped to NT$496B (+41% QoQ, +67% YoY), pulling free cash flow down from NT$348B to NT$287B. This is the inevitable cost of AI expansion — to meet data-center compute demand, TSMC must keep adding advanced capacity. Free cash flow will swing with the build-out pace in the near term, but as long as AI demand materializes, this capex converts into future volume and price. A/R days rose to 29 and inventory days to 87, a mild lengthening of working capital worth tracking but not a concern today.

图 9：经营现金流创高，但 CapEx 环比 +41% 使自由现金流回落至 NT$287B。 — Figure 9: Operating cash flow hit a record, but CapEx +41% QoQ pulled free cash flow down to NT$287B.

Figure 9: Operating cash flow hit a record, but CapEx +41% QoQ pulled free cash flow down to NT$287B.

§07Valuation and Price Target

TSMC is a consistently profitable large-cap leader, so we use a weighted multi-multiple approach rather than the sum-of-the-parts used for loss-makers. We anchor on forward EPS (in ADR/USD terms) to strip out this quarter's one-time VIS gain from GAAP net income.

Method	Formula	PT	Weight
FY27E P/E (primary)	FY27E EPS $21.24 × 24.0x	$510	45%
FY26E P/E (near-term)	FY26E EPS $17.05 × 27.0x	$460	25%
Street consensus check	18-analyst mean $520	$520	30%
Weighted PT	0.45×510 + 0.25×460 + 0.30×520	$500	100%

The three methods weight to a 12-month price target of $500 (+25.5% vs spot). A 24x FY27E multiple is not aggressive for a company growing revenue ~+25% with a 60% operating margin and a near-monopoly at the leading edge (PEG ≈ 1.0); we sit slightly below the $520 consensus mean to reflect capex pressure on cash flow and geopolitical uncertainty. Three scenarios — Bear $350 / Base $500 / Bull $620 at 25/50/25 probabilities — weight to about $493, in line with the target; the bull case $620 is above spot and the bear case $350 below it, so the rating and scenarios are self-consistent.

图 10：EPS 轨迹与远期市盈率，TTM $13.35 → FY26E $17.05 → FY27E $21.24；FY27E 远期 P/E 仅 18.8x。 — Figure 10: EPS trajectory and forward P/E; TTM $13.35 → FY26E $17.05 → FY27E $21.24; FY27E forward P/E just 18.8x.

Figure 10: EPS trajectory and forward P/E; TTM $13.35 → FY26E $17.05 → FY27E $21.24; FY27E forward P/E just 18.8x.

图 11：12 个月情景目标价，熊 $350 / 基准 $500 / 牛 $620，概率加权约 $493。 — Figure 11: 12-month scenario targets, Bear $350 / Base $500 / Bull $620, probability-weighted about $493.

Figure 11: 12-month scenario targets, Bear $350 / Base $500 / Bull $620, probability-weighted about $493.

§08Catalysts and Risks

Date / Window	Event	Direction
2026-09-16	1Q26 cash dividend ex-date (NT$7.00/share)	Steady dividend, neutral-to-positive
Mid-Oct 2026	3Q26 earnings	Decisive: validate continued AI demand, margin durability, capex/FCF balance
2H 2026	2nm (N2) ramp + A13 node + Sony imaging deal	Positive: a fresh volume-and-price layer plus customer expansion
Ongoing	U.S. tariffs/export controls + cross-strait risk + NT$ FX	Bearish tail risk; disturbs supply-demand and FX translation

Key risks:
(1) the AI capex cycle peaks or data-center investment slows, directly hitting the 66% HPC platform;
(2) capex keeps surging (+41% QoQ this quarter) and free cash flow misses;
(3) geopolitics: cross-strait tensions, U.S. export controls on China, and potential tariffs disturb supply-demand and capacity footprint;
(4) a stronger Taiwan dollar erodes the USD translation of revenue and profit;
(5) advanced-node ramp or yield disappoints (e.g., a bumpy 2nm climb).

Upside risk: if AI demand keeps beating, 2nm ramps faster than planned, and the company raises full-year revenue and capex guidance, the multiple could re-rate above the $520 consensus mean, mapping to the $620 bull case.

§09Sources, Limits and Disclosure

TSMC 2Q 2026 earnings conference materials (2026-07-16): statements of comprehensive income / balance sheet / cash flows / revenue by technology and platform / recent major events
Price, market cap, 52-week range, analyst targets and forward-EPS consensus (FY26E $17.05 / FY27E $21.24), rating split: Yahoo Finance (TSM and 2330.TW, 2026-07-17 close)
One-time gain attribution: TSMC recent-events disclosure “sold 8.1% of Vanguard” (2026-05-15); spot USD/TWD 32.33 (Yahoo Finance)

Limitations: ch01 uses real price anchors rather than a weekly curve (no verified OHLC series, so no illustrative price chart is drawn); operating income is computed as revenue × the official operating margin; the after-tax amount of the one-time VIS gain is not broken out in the release, so the clean net income/EPS/margin are author estimates (assuming ~10% tax on the disposal gain); specific 3Q26 and full-year company guidance figures are not in the materials obtained, so this report cites no specific guidance and uses analyst consensus for forward EPS; the ADR premium is computed at the spot FX rate and will fluctuate; fields without a public source (beta, institutional ownership %, options IV, insider trades) were not fabricated. This report is not investment advice.

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