Taiwan Semiconductor to Invest $100 Billion in U.S. Manufacturing
Taiwan Semiconductor TSM is making news today as the chip manufacturer announces a substantial $100 billion investment in U.S. manufacturing plants. This move aims to enhance TSMC’s footprint in the United States following its earlier commitment of $65 billion to establish fabrication facilities in Arizona.
This investment bolsters the supply chain for chip materials. TSMC’s products and services play a crucial role for many U.S. tech companies, particularly Apple AAPL, its largest customer.
Significance of Apple Partnership
As a key supplier for notable chip manufacturers, including Nvidia NVDA and AMD AMD, TSMC has a substantial relationship with Apple. The technology firm relies heavily on TSMC’s advancements for its MacBook computers, iPads, and iPhones.
In 2023, it was reported that Apple accounted for about a quarter of TSMC’s revenue, translating to approximately $17 billion. The strong collaboration with U.S. firms and government is reflected in TSMC’s anticipated revenue growth, projected to increase by 26% in fiscal 2025 to $113.63 billion, up from $90.08 billion last year. Furthermore, revenue is expected to rise by another 19% in FY26, surpassing $135 billion.
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EPS Growth and Positive Revisions
Acknowledged for its operational efficiency, TSMC’s annual earnings per share (EPS) are forecasted to jump 30% this year, reaching $9.20 compared to $7.04 in 2024. Additionally, EPS for FY26 is projected to rise by another 20%.
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Moreover, estimates for FY25 and FY26 have been adjusted upward by 4% and 1%, respectively, within the last 60 days.
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TSM Stock Performance and Valuation
Despite recent market fluctuations, TSMC stock has decreased by 9% in the first quarter of 2025, yet remains up by +30% over the past year. In the past three years, TSM’s stock has achieved gains near +70%, outpacing broader market indexes and Apple’s +48% performance.
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Currently trading around $178, TSM shares have a forward earnings multiple of 19.6X, close to their decade-long median and well below a high of 34.4X. Compared to the S&P 500’s 22.4X valuation, TSM might present a more affordable avenue to gain exposure to Apple’s market authority, especially with AAPL trading over $240 at a 33.2X forward earnings multiple.
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Conclusion and Final Thoughts
With its ambitious growth strategy and encouraging earnings estimate revisions, TSMC holds a Zacks Rank of #2 (Buy).
Although China has criticized TSMC for potentially jeopardizing Taiwan’s semiconductor industry for political leverage with the U.S., many investors recognize that expanding U.S. operations could be beneficial, especially given TSMC’s client roster, featuring major tech players like Apple, Nvidia, and AMD.
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Taiwan Semiconductor Manufacturing Company Ltd. (TSM): Free Stock Analysis report
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This article originally published on Zacks Investment Research (zacks.com).
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
