TSMC Soars 72% in 2025, but at Lower Multiples Than Rivals—Here's Why 2026 Looks Even Better

Taiwan Semiconductor Manufacturing (TSMC) has become the quiet winner of the 2025 AI boom. While Nvidia and Broadcom grabbed headlines, TSMC’s stock has delivered a quietly impressive 72% gain since the beginning of 2025. What’s more striking: the company just reported strong fourth-quarter results, and management’s guidance for 2026 suggests the stock still has significant room to run.

Here’s what makes TSMC particularly compelling right now—it’s not just the growth rate, but the fact that it’s delivering that growth at a fraction of the valuation multiples commanded by its competitors.

The Semiconductor Giant Powering the AI Infrastructure Build-Out

TSMC isn’t a household name like Nvidia, but it’s arguably more important to the AI revolution. As the world’s largest contract chip manufacturer, TSMC has 72% of the advanced semiconductor manufacturing market—a position that only strengthened in 2025. When Nvidia, Broadcom, and other AI chip designers need cutting-edge production capacity, TSMC is their first and often only choice.

Nvidia’s CEO Jensen Huang has called TSMC “the best semiconductor manufacturer in the world by an incredible margin.” That’s not hype. TSMC’s technological edge creates a self-reinforcing cycle: its advanced capabilities attract major customers, which provide revenue for additional research and development, which further widens its technology lead. Only two other manufacturers come close, and TSMC has built a moat that competitors will struggle to breach for years.

This dominance gave TSMC significant pricing power. The company raised prices on products representing roughly three-quarters of its revenue at the beginning of 2026, with plans for annual increases through 2029. Meanwhile, newer-generation chips command premium pricing due to tight capacity constraints.

Valuation Multiples Tell the Real Story: Why TSMC Looks Like a Bargain

Here’s where TSMC’s investment case becomes truly compelling. Despite its superior market position and dominant growth profile, the company trades at 24x forward earnings—a significant discount to both Nvidia (32x) and Broadcom (41x).

That valuation multiple is striking when you consider TSMC’s growth trajectory. Management recently raised its five-year compound annual growth rate (CAGR) outlook from 20% to 25% through 2024 and beyond. Following 36% revenue growth in 2025, this implies continued annual expansion of roughly 22.4% for the remainder of the decade.

This growth isn’t theoretical. Management is backing it up with capital expenditure plans of $52-$56 billion for 2026—a 32% increase from prior levels. That spending is designed to meet surging demand for advanced chip manufacturing capacity. While higher capital spending will temporarily pressure depreciation expenses, management expects revenue growth to far outpace those costs, driving continued margin expansion.

Pricing Power Meets Capital Discipline

What separates TSMC from other growth stories is operational leverage. With strong pricing power for advanced processes and a massive installed base of customers who have no alternative suppliers, TSMC can simultaneously raise prices, expand capacity, and improve profitability.

The company expects to maintain healthy gross margins while expanding operating margins over time. That combination—pricing increases combined with operational efficiency—means earnings should grow considerably faster than revenue.

When a company with TSMC’s competitive advantages trades at substantially lower earnings multiples than weaker competitors, it creates opportunity. The market seems to be underappreciating TSMC’s combination of stable, growing revenue; expanding margins; and the structural tailwinds from ongoing AI infrastructure development.

The AI Chip Demand Story Isn’t Over

Demand for advanced semiconductor capacity shows no signs of slowing in 2026. Major cloud providers, AI chip makers, and technology companies continue racing to secure manufacturing slots. TSMC’s recent earnings guidance reflected confidence in maintaining growth momentum, with new process nodes already commanding strong customer interest.

For investors, this creates a rare scenario: a company with fortress-like competitive positioning, superior growth prospects, and valuation multiples that still offer room for re-rating as market participants recognize its true earning power.

The 72% 2025 rally was just the beginning. TSMC’s combination of reasonable earnings multiples relative to growth, dominant market share, and strong pricing dynamics suggests significantly more upside potential lies ahead in 2026 and beyond.