One of the key growth catalysts for Taiwan Semiconductor Manufacturing Company TSM, popularly known as TSMC, is its aggressive expansion of advanced-node manufacturing capacity. TSMC has highlighted that demand for its N3 process technology remains exceptionally strong.
TSM is expanding its advanced-node manufacturing footprint to meet growing customer demand. The company is building a new 3nm fabrication facility in Taiwan that is expected to begin production in the first half of 2027, while also increasing 3nm capacity in Arizona, with production targeted for the second half of 2027. In addition, TSMC plans to introduce 3nm production at its second fabrication plant in Japan by 2028.
The company is also boosting output by converting existing 5nm production tools to support 3nm manufacturing and optimizing production efficiency across its N7, N5 and N3 process nodes.
Management also noted that TSMC is working with outsourced semiconductor assembly and test (OSAT) partners while simultaneously expanding its own advanced packaging capacity, as customer demand continues to exceed available industry capacity.
At the same time, TSMC’s fabrication facilities are operating at very high utilization rates, providing a significant boost to profitability. Margin expansion is being driven by stronger-than-expected utilization levels, sustained demand for leading-edge technologies and the cost efficiencies associated with running fabs at near-full capacity.
Peer Update
NVIDIA’s NVDA momentum continues to be powered by unprecedented hyperscaler and enterprise AI infrastructure investments. First-quarter fiscal 2027 revenues surged 85% year over year, while Data Center revenues jumped 92%.
Management described the ongoing buildout of AI factories as the largest infrastructure expansion in human history, driven by agentic AI deployments across cloud, enterprise and sovereign AI projects. Beyond GPUs, NVIDIA is rapidly expanding its AI ecosystem through networking, CPUs, inference software and edge AI. The company also unveiled its Vera Rubin AI platform, BlueField-4 infrastructure processors and Dynamo 1.0 inference software, which reportedly improves generative and agentic inference performance by up to seven times.
Micron Technology MU is benefiting from the AI boom through its High Bandwidth Memory (HBM) solutions, which are seeing strong adoption among hyperscalers and enterprise customers and are already generating multi-billion-dollar quarterly revenues.
MU has also issued a strong revenue outlook supported by robust memory demand and rising DRAM prices. Micron is strengthening its position in the AI ecosystem through strategic partnerships and long-term agreements with key industry players, including NVIDIA, AMD and Intel, enabling it to expand its share of the rapidly growing AI infrastructure market.
TSM Stock Price Performance
Shares of TSMC have gained 108.6% over the past year compared with the industry’s growth of 104.6%. The S&P 500 composite has grown 30.3% in the same period.
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TSMC’s Valuation
From a valuation standpoint, TSM trades at a forward 12-month price-to-sales ratio (P/S) of 11.92X, above the industry median of 10.56X.
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TSM Stock Consensus Estimate Trend
The Zacks Consensus Estimate for TSM’s 2026 earnings has moved north 1.2% over the past 30 days.
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TSM stock currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).