$Taiwan Semiconductor(TSM.US)TSMC: AI demand remains powerful, but expectations are risingTSMC’s latest numbers reinforc…

$Taiwan Semiconductor(TSM.US)

TSMC: AI demand remains powerful, but expectations are rising

TSMC’s latest numbers reinforce why it remains one of the biggest beneficiaries of the AI boom. September revenue jumped 54.6% YoY to NT$511.9 billion, taking 3Q26 revenue to a record NT$1.49 trillion. Jan–Sep revenue is already up 41.1%.

Fundamentally, the story remains compelling. 2Q26 revenue rose 36%, while net profit surged 77.4%. Gross margin reached 67.7%, with 3nm and 5nm together accounting for 63% of wafer revenue. TSMC also maintains a strong balance sheet, providing capacity to fund its aggressive expansion.

The catch is valuation. TSMC trades at roughly 34x trailing earnings, leaving less room for disappointment. Technically, momentum has also cooled, with the stock showing mixed signals after its strong run. This could mean volatility rather than an immediate reversal of the longer-term trend.

Elon Musk ruling out TSMC operating Terafab is a modest sentiment headwind rather than a fundamental blow. TSMC could potentially remain involved through other arrangements, but Musk’s companies building and operating the facility highlights a longer-term risk: major AI players may increasingly pursue greater control over their semiconductor supply chains.

For existing investors, the fundamentals still support staying invested, although taking some profit after a strong run could be sensible for those with an oversized position. New investors may want to stagger entries rather than chase momentum, particularly around upcoming earnings.

The key question is no longer whether AI chip demand exists — it clearly does. The bigger question is whether TSMC’s earnings growth can continue to justify its premium valuation.

Not financial advice.