Taiwan Semiconductor Manufacturing Company (TSMC) reported record third-quarter revenue of $46.7 billion, surpassing analyst expectations, as demand for advanced chips from AI leaders like Nvidia and AMD continued to outpace forecasts. The company's September sales alone reached NT$511.86 billion, up 54.6% year-over-year, contributing to a quarterly total of NT$1.49 trillion, a 50% increase from the same period last year and ahead of the NT$1.46 trillion consensus.
The strong performance beat TSMC's own guidance of $44.6 billion to $45.8 billion, underscoring the sustained momentum in AI infrastructure spending. However, with the company's market capitalization hovering around $2.1 trillion, the central question for investors is whether earnings growth can keep pace with the stock's elevated valuation, which is trading near record levels.
Earnings growth remains robust
TSMC is expected to report net profit of approximately NT$740.8 billion when full results are released on October 15, a 64% increase from a year earlier. This indicates that revenue growth is translating into powerful earnings expansion rather than being eroded by rising costs. Citi analyst Atif Malik noted, "Another round of consensus earnings upgrades likely to come," projecting more than 40% revenue growth through 2027, supported by AI compute, agentic AI, co-packaged optics, and the ramp of TSMC's N2 process.
The valuation defense hinges on the denominator effect: as analysts raise earnings forecasts, the stock's price-to-earnings ratio becomes more palatable. Goldman Sachs recently lifted its Taiwan-listed price target to NT$3,300 with a Buy rating, expecting US-dollar revenue to grow 42% in 2026 and 36.9% in 2027. The bank also raised its 2027 and 2028 capital-expenditure forecasts to $85 billion and $98 billion, signaling confidence in sustained demand across the AI stack.
AI demand broadens beyond GPUs
AI infrastructure increasingly requires advanced CPUs, networking chips, custom accelerators, and next-generation process nodes, all of which flow through TSMC's fabs. Goldman highlighted stronger server-CPU demand linked to agentic AI as a key driver. AMD CEO Lisa Su reinforced this view, stating the company expects to expand chip supply substantially and needs more advanced wafer capacity over the coming years.
This broadening demand is critical because it reduces reliance on any single product category. TSMC's capital expenditure plans indicate preparation for growth across multiple AI segments, from GPUs to networking and custom silicon.
Market reaction and valuation concerns
Despite the record sales, TSMC's Taipei-listed shares fell 1.35% ahead of the revenue release, reflecting that record numbers are becoming less surprising. Concord Securities analyst Kerry Huang noted that as Taiwan's market approached the 50,000-point milestone, some investors sold shares to lock in gains. He also warned that rising US Treasury yields, recently around 5.34%—the highest since 2002—could pressure expensive technology stocks by increasing funding costs and weighing on valuations.
Investors will scrutinize the October 15 earnings report for further upgrades, N2 execution, gross-margin durability, and evidence that Nvidia, AMD, Apple, and hyperscalers continue to increase AI investment at a pace that sustains high utilization and pricing power.
This article is for informational purposes only and does not constitute financial advice.
