TSMC's Upbeat Q1 Earns It A New Price Target Implying Potential 32% Upside — CEO Reiterates Conviction In AI Megatrend

• Needham stated that TSMC’s 66.2% gross profit margin in Q1 and the second-quarter margin guidance were the highlights of the earnings announcement.
• The firm also noted that TSMC is trying to strike a balance between customer demand and avoiding overrunning its capital expenditure forecast for the fiscal year.
• TSMC expects its FY26 capex to come in at the higher end of its previous projection of $56 billion.

Taiwan Semiconductor Manufacturing Co. (TSM) earned a price target hike on Thursday following the company’s beat-and-raise performance in the first quarter (Q1).

According to TheFly, Needham analysts raised their price target for TSM to $480 from $410, implying an upside of nearly 32% from current levels. The firm maintained its ‘Buy’ rating for the TSM stock.

Taiwan Semiconductor shares were down more than 2% in Thursday’s opening trade.

Strong Print That Is Hard To Pick On, Says Needham

Needham stated in its note that TSMC’s Q1 earnings print was strong and hard to pick on. The firm stated that TSMC’s gross profit margin of 66.2% in Q1 and the margin guidance for the second quarter (Q2) were the best highlights of the earnings announcement.

The firm also noted that TSMC is trying to strike a balance between customer demand and avoiding overrunning its capital expenditure forecast for the fiscal year. TSMC expects its FY26 capex to come in at the higher end of its previous projection of $56 billion.

Conviction In AI Megatrend Remains High, Says TSMC CEO

TSMC CEO CC Wei stated during a call with analysts that his conviction in the AI megatrend remains high, driven by strong signals and a positive outlook from the company’s customers.

“AI-related demand continued to be extremely robust. The shift from generative AI and the query mode to agentic AI and ... the action mode is leading to another step up in the amount of tokens being consumed. This is driving the need for more and more computation,” Wei added.

Overall, advanced 7-nanometer and below wafer technologies accounted for the bulk of TSMC’s wafer revenue during the quarter, at 74%. The 5-nanometer node emerged as the largest single contributor at 36%, followed by the bleeding-edge 3-nanometer node at 25%.

TSMC CEO Downplays Disruption Concerns Due To Iran War 

Wei downplayed concerns about disruptions due to the war in Iran, stating that the company has diversified its supply chains.

“For specialty chemicals and gases, including helium and hydrogen, we source from multiple suppliers in different regions, and we have prepared safety stock inventory on hand. We are also working closely with our suppliers to further strengthen the resiliency and sustainability of our supply chain,” he said.

Wei also highlighted that the Taiwan government has secured sufficient LNG supply, expected to last through May, so TSMC does not expect any near-term disruption or impact on its operations.

TSMC’s Q1 Beats Wall Street Expectations

TSMC’s net income in Q1 stood at NT$572.48 billion ($18.14 billion), beating Wall Street estimates of NT$553.4 billion, according to Fiscal.ai data. Adjusted earnings per share (EPS) came in at NT$22.08, beating an estimated NT$20.96.

TSMC’s revenue in Q1 came in at NT$1.134 trillion, surpassing an estimate of NT$1.127 trillion.

The company forecast a gross profit margin of 65.5% to 67.5% in the second quarter, with revenue between $39 billion and $40.2 billion, according to the company.

How Did Retail Traders React?

Retail sentiment on Stocktwits around Taiwan Semiconductor trended in the ‘extremely bullish’ territory, with message volumes at ‘extremely high’ levels at the time of writing.

One bullish user stated that TSMC’s earnings were great, except for the company’s capex guidance.

TSM stock is up 22% year-to-date and 133% over the past 12 months. The VanEck Semiconductor ETF (SMH) is up 134% over the past 12 months, while the Avantis Emerging Markets Equity ETF (AVEM) is up 53%.

NT$1 = $0.032

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