TSMC Shares Soar to Record Peak Amid AI Boom, Fueling Investor Debate
Taiwan Semiconductor Manufacturing Company (NYSE: TSM), the world's dominant contract chipmaker, saw its shares surge to a historic high this week. The milestone caps a staggering 50% rally over the past year, a run fueled by its pivotal role in supplying the silicon brains for the artificial intelligence revolution.
The company's latest quarterly report, ending December 31, 2025, underscored its financial muscle. While revenue grew a solid 21%, net income skyrocketed 35% year-over-year. This marks the eighth consecutive quarter of annual profit growth, highlighting TSMC's ability to translate booming demand into superior margins through its unparalleled manufacturing scale and efficiency.
With a market capitalization hovering around $1.7 trillion, TSMC sits among the globe's most valuable enterprises. Valuation metrics are now in focus: the stock trades at a forward price-to-earnings (P/E) ratio of approximately 26, a premium to the S&P 500's average of 22. However, many market watchers argue this premium is justified for a company considered the indispensable foundry for AI leaders like Nvidia and AMD, with its technological lead and pricing power seen as durable moats.
"The question isn't about missing the boat—it's about whether this is a speedboat or a cruise ship," said Michael Chen, a senior technology analyst at Horizon Capital. "TSMC isn't just riding a cycle; it's building the infrastructure for the next decade of computing. While near-term volatility is possible, the structural demand story for advanced semiconductors remains intact."
Other voices strike a more cautious tone. Sarah Wilkinson, a portfolio manager at ClearView Investments, noted, "The numbers are undeniably strong, and the AI tailwind is real. But at this valuation, much of that growth is already priced in. Investors are paying for perfection, leaving little margin for error if capex rises or demand from other segments softens."
A more pointed critique came from Leo Torres, an independent market commentator known for his blunt style. "This is peak euphoria," he stated. "Everyone's piling into the 'must-own' AI trade, blind to concentration risk. TSMC is a geopolitical flashpoint and faces immense capital intensity. A 26 P/E for a cyclical business, even a fantastic one, reeks of late-cycle mania. Smart money should be trimming, not FOMO-ing in."
Despite the record share price, the broader consensus suggests TSMC's journey may not be over. As AI applications proliferate from data centers to edge devices, the need for more powerful and efficient chips is expected to sustain long-term demand for TSMC's cutting-edge fabrication. The investment debate now centers not on the company's quality, which is widely acknowledged, but on the price one pays for that excellence in a rapidly evolving market.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
This analysis was adapted from a report originally published by The Motley Fool.