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Analysis

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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%
01 Summary 02 Price & Street 03 Bull/Bear View 04 Financial Truth 05 Business Mix 06 Balance & Cash 07 Valuation 08 Catalysts 09 Sources & Disclosure

§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

MetricValueSource / Note
Current price (TSM ADR)$398.37Yahoo Finance · Jul 17 close
Market cap$2.07T398.
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