Taiwan Semiconductor: The Buildout Is Still Accelerating

I upgrade Taiwan Semiconductor to Buy, citing sustainable AI-driven demand and a now-acceptable valuation. TSM delivered Q2 revenue of $40.2B (+34% YoY), with gross margin at 67.7% and accelerating growth from advanced nodes and AI. Management raised 2026 revenue outlook to 40%+ growth, with N2 and N3 ramps driving capacity expansions and ongoing margin resilience. TSM’s risk profile is concentrated in AI and hyperscaler spending, but prudent pricing, customer commitments, and diversification support the upside.

Back in April this year, I rated Taiwan Semiconductor ( TSM ) a Hold due to an extended valuation but acknowledged ongoing prospects given the AI buildout for which they remain a crucial supplier that cannot match current demand.