Key Takeaways
- TSMC’s dominance in the semiconductor foundry market is undisputed, particularly in advanced nodes below 7nm, making it a critical supplier for tech giants like Apple, NVIDIA, and AMD.
- The company demonstrates strong financial health, with revenue growing 26.9% year-on-year in June 2025, driven by persistent demand for AI chips.
- Despite a reasonable valuation compared to industry peers, TSMC’s stock carries significant geopolitical risk due to its heavy operational concentration in Taiwan.
- Future growth is underpinned by the AI boom and strategic global expansion, though this requires substantial capital expenditure which may affect near-term profitability.
Taiwan Semiconductor Manufacturing Company (TSMC), listed as TSM on the NYSE, stands as the linchpin of the global semiconductor industry, a position that has only solidified with the explosive growth of artificial intelligence (AI) and advanced computing. As the world’s leading dedicated foundry, TSMC is uniquely placed to capitalise on the insatiable demand for high-performance chips, a trend unlikely to abate in the near term. With a market valuation that some investors on platforms like X, such as TacticzH, consider undervalued relative to its growth potential, the question arises: does the data support such optimism?
Unrivalled Position in the Foundry Market
TSMC’s dominance in the semiconductor foundry space is not mere rhetoric. The company reported a consolidated revenue of NT$263.71 billion (approximately US$8.11 billion) for June 2025, reflecting a year-on-year increase of 26.9%, despite a month-on-month decline of 17.7% attributed to currency fluctuations with the New Taiwan dollar. For the second quarter of 2025 (Q2: Apr–Jun), TSMC achieved record revenue, underscoring its ability to weather macroeconomic headwinds like tariff pressures and exchange rate volatility. This performance aligns with broader industry trends, where demand for AI-driven chips continues to outpace supply, particularly for advanced nodes below 7nm, where TSMC holds a near-monopoly.
The company’s client roster reads like a who’s who of tech giants: Apple, NVIDIA, AMD, and Qualcomm, among others, rely on TSMC for their cutting-edge designs. This diversified customer base mitigates risk, ensuring that even if one sector falters, others—such as AI infrastructure or automotive chips—can pick up the slack. Unlike integrated device manufacturers, TSMC’s pure-play foundry model means it focuses solely on manufacturing, avoiding conflicts of interest with its clients. This strategic clarity has cemented its role as the go-to partner in a market projected to grow at a compound annual rate of over 8% through 2030.
Valuation: A Bargain or a Risk?
Turning to valuation, TSMC’s forward price-to-earnings (P/E) ratio stands at approximately 19 as of mid-2025, with an enterprise value to EBITDA (EV/EBITDA) of around 11. These metrics suggest a stock that is reasonably priced compared to peers like NVIDIA, which often trades at multiples exceeding 40. However, the elephant in the room remains geopolitical risk. TSMC’s operations are heavily concentrated in Taiwan, a region perpetually under the shadow of potential conflict with China. While invasion scenarios are speculative and arguably overstated, they cannot be dismissed entirely. Investors must weigh this against TSMC’s ongoing efforts to diversify geographically, with new fabs under construction in the United States, Japan, and Europe, though these will not fully offset Taiwan’s centrality for years.
A glance at historical data provides context. In Q2 2022 (Apr–Jun), TSMC’s revenue grew by 36.6% year-on-year, a figure that has moderated to the 26.9% growth seen in June 2025. This slowdown reflects not a weakening of TSMC’s position but a normalisation after the post-pandemic chip boom. Comparing to Q2 2024 (Apr–Jun), where revenue growth was reported at 32.9% year-on-year, the current trajectory still indicates robust health, particularly as AI adoption accelerates.
Financial Snapshot
Below is a summary of TSMC’s recent financial performance, highlighting key metrics for investor consideration:
| Period | Revenue (NT$ Billion) | Year-on-Year Growth (%) | Notes |
|---|---|---|---|
| June 2025 | 263.71 | 26.9 | Month-on-month decline of 17.7% due to currency impact |
| Q2 2025 (Apr–Jun) | Record (exact figure pending) | Not disclosed | Reported as record revenue by company |
| Q2 2024 (Apr–Jun) | Not specified | 32.9 | Strong growth driven by AI and smartphone demand |
Market Dynamics and Future Outlook
The semiconductor industry is not for the faint-hearted. Cyclical downturns, supply chain disruptions, and geopolitical tensions are par for the course. Yet TSMC’s ability to maintain margins—historically above 50% gross margin—speaks to its operational excellence. The AI boom, in particular, offers a tailwind that few competitors can match. As data centres and autonomous vehicles demand ever-more-powerful chips, TSMC’s advanced process nodes (3nm and below) position it as an indispensable player.
One potential headwind is the rising cost of capital expenditure. Building new fabs to meet demand and diversify geographically is not cheap, with estimates suggesting TSMC will spend upwards of US$30 billion in 2025 alone. While this could pressure near-term profitability, it is a necessary evil to sustain long-term growth and reduce reliance on Taiwan-centric production.
In conclusion, TSMC represents a compelling case for investors with a stomach for calculated risk. Its valuation appears reasonable, its market position unassailable, and its exposure to high-growth sectors like AI undeniable. However, the geopolitical overhang remains a wildcard that no amount of financial rigour can fully quantify. For those willing to bet on stability in the Taiwan Strait—or on TSMC’s global expansion mitigating such risks—the stock could indeed be one of the more attractive plays in the tech space. A touch of dry humour might note that investing in TSMC is akin to betting on the house in a casino: the odds are in your favour, but the house still sits on a fault line.
References
- Financial Modeling Prep. (n.d.). Taiwan Semiconductor Manufacturing Company Limited (TSM) Financial Summary. Retrieved July 20, 2025, from https://site.financialmodelingprep.com/financial-summary/TSM
- Seeking Alpha. (2025, July 14). Taiwan Semiconductor: The ‘Go To’ Factory For AI Boom. Retrieved from https://seekingalpha.com/article/4801144-taiwan-semiconductor-the-go-to-factory-for-ai-boom
- Stock Analysis. (n.d.). Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) Stock Price, News & Analysis. Retrieved July 20, 2025, from https://stockanalysis.com/stocks/tsm/
- TacticzH [@TacticzH]. (2025, May-June). [Various posts on TSMC valuation and market position]. X. Retrieved from https://x.com/TacticzH/
- TechPowerUp. (2025, July 10). TSMC Announces Record Q2-2025 Revenue Amidst Currency and Tariff Slump. Retrieved from https://techpowerup.com/338841/tsmc-announces-record-q2-2025-revenue-amidst-currency-and-tariff-slump
- TipRanks. (2025, July 10). TSMC Reports June 2025 Revenue with Yearly Growth. Retrieved from https://www.tipranks.com/news/company-announcements/tsmc-reports-june-2025-revenue-with-yearly-growth
- TSMC. (n.d.). Financial Calendar. Retrieved July 20, 2025, from https://investor.tsmc.com/english/financial-calendar
- TSMC. (2025, July 10). June 2025 Revenue Report. Retrieved from https://investor.tsmc.com/english
- Yahoo Finance. (n.d.). Taiwan Semiconductor Manufacturing Company Limited (TSM). Retrieved July 20, 2025, from https://finance.yahoo.com/quote/TSM/
- Yahoo Finance. (2025, July 13). Prediction: Taiwan Semiconductor Manufacturing Stock Will Hit $200 by 2025. Retrieved from https://finance.yahoo.com/news/prediction-taiwan-semiconductor-manufacturing-stock-164700211.html
