TSMC has once again maintained a significant lead over its pure-play foundry peers thanks to its continued advancements in cutting-edge process technology and advanced packaging. (Reuters)
[Financial Channel/Comprehensive Report] As the demand for artificial intelligence drives revenue growth, TSMC accounted for 73% of the wafer foundry market for the second consecutive quarter. Is the stock worth buying? Foreign media Zacks reported that the answer is yes.
According to data from Counterpoint Research, in the second quarter of 2026, the pure wafer foundry industry continued to benefit from the surge in demand related to artificial intelligence (AI), with revenue increasing by 29% year-on-year. Capacity reallocation remains the main cause of the imbalance between supply and demand in advanced and mature processes. TSMC maintained its dominance, capturing 73% of the market for the second consecutive quarter. This is due to the company's mass production of 2-nanometer (N2) wafers, the increase in 3-nanometer (N3) wafer production capacity, the tight supply of 8-inch and 12-inch mature processes, and advanced packaging technology.
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Affected by this momentum, TSMC's stock price rose 41.1%, far exceeding the industry's 17.9% increase and the S&P 500 index's 12% increase.
The company's near-term prospects are primarily driven by continued strong demand for its leading process technologies. The boom in artificial intelligence continues to drive demand for more powerful computing power, supporting strong demand for cutting-edge chips. Management said that its customers and its customers, especially cloud service providers, continue to send strong demand signals, giving it confidence in the development trend of artificial intelligence in the coming years.
The rise of artificial intelligence is making CPUs play a more important role in artificial intelligence data centers, thus driving the demand for chips in addition to artificial intelligence accelerators. TSMC expects that customers will benefit from this trend regardless of whether they adopt x86, Arm or RISC-V architecture. The company has begun working with CPU customers to provide advanced technology and production capabilities to seize opportunities in the field of smart body artificial intelligence.
TSMC is also ramping up capital spending, which management says is tied to higher growth opportunities in the coming years. The company is building 13 leading advanced packaging fabs in Taiwan and plans to continue investing in Taiwan. In addition, TSMC also announced an additional investment of US$100 billion in Arizona to build wafer fabs and advanced packaging facilities that support N2 and below technologies to meet the strong demand from its major US customers in the coming years.
TSMC's global plan also continues to advance, and it will build a new N3 wafer fab in Taiwan, Arizona in the United States, and Japan to meet strong demand in the coming years. At the same time, the company is transforming Taiwan's 5-nanometer (N5) process equipment to support N3 production capacity and optimize the production capacity of each process node, including flexibly supporting N7, N5 and N3 processes.
TSMC’s A14 technology is advancing as planned, with pre-production expected to begin in 2027 and mass production in 2028. Compared with N2, A14 is expected to increase performance by 10% to 15% at the same power consumption, or reduce power consumption by 25% to 30% at the same speed, while increasing chip density by nearly 20%. The company has observed that customers in the field of smartphones and high-performance computing artificial intelligence applications have shown strong interest and enthusiasm in this technology. The customer's tape-out work has already begun and is ahead of schedule.
Based on the price-to-earnings ratio (P/E) for the next 12 months, TSMC's P/E ratio is 21.84 times, which is lower than the median of 24.39 times.
Leveraging its continued advancements in cutting-edge process technology and advanced packaging, TSMC once again maintained a significant lead over its pure-play foundry peers, with its stock price outperforming the industry average and the overall market. Technical indicators suggest TSMC stock will continue to rise. Its price-to-earnings ratio is still below its historical median, making investing in TSMC attractive at this time.
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