Research · Initiation · 6 October 2026
TSMC NYSE: TSM
TSMC is the bottleneck today. At US$486, the ADR already pays for it still being one in 2028.
The call No call
- Price at publication
- US$485.80close, 5 October 2026
- Target
- Noneno position at this price
- Conviction
- Medium
What would prove the thesis wrongFull year 2027 revenue grows 30 per cent or more in US dollars with an operating margin of 58 per cent or more, or TSMC raises its through-the-cycle gross margin floor above 56 per cent, or the ADR trades above US$560 by October 2027 without either.
What would turn this into a callA price below about US$400 a share, or TSMC raising its through-the-cycle gross margin floor above 56 per cent.
Read the full notePDF, 5 pages: thesis, valuation, scenarios, risks and sources Open the modelExcel, live formulas: change an assumption and the target moves
The call in brief
- TSMC makes almost every advanced AI chip, and on today's horizon its factories, not the grid, are what limits AI supply. Its own numbers agree: wafers shipped rose 17 per cent in the second quarter and revenue per wafer rose 17 per cent too.
- Scarcity shows up as margin. Gross margin reached 67.7 per cent in the second quarter, almost twelve points above the 56 per cent TSMC itself calls achievable through the cycle.
- July and August revenue already put the third quarter on course to beat the top of TSMC's own guide, so the near horizon of the claim is holding.
- At US$485.80 the ADR trades at 24 times my 2027 estimate. At 20 times, the price needs a 2028 operating margin of about 58 per cent, the scarcity margin, just as US$60 billion a year of new capacity starts to land.
- My call is no call: the base case is worth about the price, and the downside if the grid becomes the slower clock early is larger than the upside.