Why TSMC Looks Even More Attractive in 2026: A 72% Year Already Behind It

Taiwan Semiconductor Manufacturing (TSMC) has emerged as one of the most compelling opportunities in the AI-driven semiconductor boom. After surging 72% since the beginning of 2025, the company’s stock continues to attract investor attention heading into 2026. What makes it particularly interesting is that this stellar performance may only be the beginning—management’s forward guidance suggests the stock could look even more attractive as the year progresses.

The Undisputed Leader in Advanced Chip Manufacturing

TSMC’s dominance in contract semiconductor manufacturing is nearly impossible to challenge. The company controls roughly 72% of the market for advanced chip production, a position that has only strengthened throughout 2025. While Nvidia and Broadcom have been major beneficiaries of AI chip demand, they remain dependent on TSMC’s manufacturing prowess.

Nvidia CEO Jensen Huang publicly acknowledged TSMC’s supremacy, calling it the semiconductor manufacturer “by an incredible margin.” This isn’t mere flattery—TSMC’s technological edge creates what industry observers call a self-reinforcing competitive advantage. The company’s cutting-edge capabilities attract the largest customers, generating substantial revenue that funds further research and development. This cycle then enables TSMC to invest in even more advanced processes, strengthening its market position further.

The company has leveraged this dominant position to impose price increases on products representing about three-quarters of its revenue, with annual hikes planned through 2029. Additionally, next-generation manufacturing processes command premium pricing due to surging demand.

Growth Prospects That Justify the Valuation

Management’s recent earnings guidance reveals why TSMC appears so compelling to forward-looking investors. The company projects capital expenditures between $52 billion and $56 billion for 2026—a 32% increase at the midpoint. Rather than diluting profitability, this aggressive investment is expected to accelerate revenue growth.

Management upgraded its five-year compound annual growth rate guidance from 20% to 25% for the period beginning in 2024. Following 36% growth in 2025, this implies sustained annual revenue expansion of roughly 22.4% through 2029. Strong pricing power should enable TSMC to maintain elevated gross margins while improving operating margins, meaning earnings growth will likely outpace revenue growth.

Valuation That Remains Attractive

Perhaps most compelling is TSMC’s current valuation relative to peers. At less than 24 times forward earnings, the stock trades at a significant discount to competitors. Broadcom commands a 41 times earnings multiple, while Nvidia fetches 32 times earnings. This valuation gap exists despite TSMC’s comparable or superior growth trajectory, making it an attractive entry point for value-conscious investors.

The combination of consistent double-digit growth, strong pricing power, expanding margins, and reasonable valuation creates a particularly compelling investment thesis. While the stock has already delivered impressive returns in 2025, the prospects for 2026 suggest the upside story remains far from exhausted.