Taiwan Semiconductor is Right Back to Where It Was a Month Ago: Pull The Trigger?

Key Points:

• Taiwan Semiconductor Manufacturing (TSMC) reported its sixth consecutive quarter of record profits with Q3 EPS of $4.60 and revenue of $46.7 billion, surpassing expectations and raising full-year growth guidance to approximately 44%.
• Despite strong financial performance and growing AI demand, shares have declined recently, trading at $422.40, below their 52-week high of $487.47, partly due to margin dilution from the 2nm ramp and increased capital expenditures projected at $60-$64 billion for 2026.
• Gross margins slipped to 66.4%, impacted by overseas fabs and the 2nm technology rollout, with management cautious about 2027 amid potential weakness in consumer markets and geopolitical risks related to Taiwan.
• Wall Street remains bullish with a consensus price target of $578.22, implying nearly 37% upside, supported by 20 out of 21 analysts rating the stock as a buy or strong buy, driven by ongoing growth and expansion in advanced chip manufacturing capacity.
• Key near-term catalysts include the upcoming Q4 earnings report and the expansion of N2 capacity, while risks to the outlook include gross margins falling below 65% and potential reductions in AI-related capital spending by hyperscalers.