TSMC’s stock price faces a profit variable of 2.57 trillion yuan, and Fashuo previewed the “fluctuation range” after the meeting

TSMC's stock will announce its third-quarter financial report on Thursday (15th), and most of the bullish news has already appeared. Foreign media reported that TSMC's stock price is facing a profit fluctuation of US$80 billion (NT$2.57 trillion). Investors are focusing on profit margins and performance guidance, and whether they can support the chip manufacturer's high valuation on the subject of artificial intelligence.

Even as TSMC reported record quarterly revenue, U.S.-listed TSMC shares closed at nearly $445 on Tuesday, about 9% below their early October highs. Invezz reported that this pullback creates a more balanced situation before the results are announced, but the options market still expects a significant reaction.

The options market predicts that TSMC's stock price will fluctuate by $18 after the release of its earnings report on the key day. The option expiring on October 16 indicates that TSMC's stock price will fluctuate by about 4% after the results are announced. At Tuesday's close, the near-at-the-money $445 calls and puts were worth about $18 combined, suggesting a post-earnings stock price range of about $427 to $463.

TSMC’s market capitalization is approximately US$2.1 trillion (NT$65 trillion), and a 4% fluctuation would mean more than US$80 billion in equity value changing hands.

Positions are also concentrated around nearby strike prices. There are over 9,500 open contracts for the $450 call option and over 6,000 open interest for the $440 put option. These levels can be used as effective indicators of the market's near-term reaction.

This arrangement is important because TSMC's revenue surprise is already known. The company reported third-quarter sales of NT$1.49 trillion, or approximately US$46.7 billion, a 50% increase from the same period last year and higher than the previous forecast of US$44.6 billion to US$45.8 billion.

Margins and fourth-quarter guidance become the real test of profitability. Therefore, the market will focus on profitability. TSMC had previously expected third-quarter gross profit margin to be 65% to 67% and operating profit margin to be 56% to 58%, compared with 67.7% and 60.3% respectively in the second quarter.

London Stock Exchange Group's (LSEG) SmartEstimate predicts net profit will grow 65% to NT$746.3 billion, which would be the sixth consecutive quarter of record profits.

According to a TipRanks report, Bank of America analyst Haas Liu expects gross profit margin to be close to 67% and expects fourth-quarter sales to grow by 10% to 15% annually. Haas Liu also raised TSMC's ADR target price from $590 to $620, saying that a valuation of about 16 times TSMC's expected 2027 earnings is "not high."

The outlook for fourth-quarter results may be more important than the final earnings number. Morgan Stanley analysts predict that TSMC will raise its revenue growth forecast for 2026 to about 40% from the current more than 40%.

AI capacity and capital spending will determine whether the premium can be maintained. The larger debate is turning to how long TSMC can sustain its extraordinary growth driven by artificial intelligence while absorbing the costs of new technology and overseas expansion.

The company in July raised its capital spending forecast for 2026 to $60 billion to $64 billion. Bank of America's Liu expects spending this year to be about $63 billion, and spending could be as high as $83 billion in 2027 as TSMC expands 3nm, 2nm, A16 and advanced packaging capacity.

Investors will be paying close attention to comments on Huida and customized AI accelerator demand, CoWoS packaging capacity and 2nm process ramp-up, with higher costs likely to put pressure on profit margins until capacity utilization improves.