TSMC Stock Surges on AI Chip Demand, Market Share Hits 38%
Taiwan Semiconductor Manufacturing Company Limited (TSMC) has witnessed a remarkable surge in its stock price and market share, fueled by robust demand for AI chips. Despite this, investors have not fully acknowledged the company's potential, with its forward P/S ratio 56% below its 5-year mean.
TSMC's latest quarterly results mirror this trend. In Q3-FY25, the company's sales exceeded expectations, with a 31.4% year-over-year (YoY) increase in revenue in September alone. This impressive growth can be largely attributed to the strong demand for AI chips, which has resulted in a noticeable shift in TSMC's revenue trends, with a 36.4% YoY increase in year-to-date (YTD) revenue through September.
TSMC's dominance in the foundry market is evident in its market share, which climbed to 38% in Q2 2025, largely driven by AI demand for its advanced 3nm and packaging technologies like CoWoS. The market anticipates this growth to continue, forecasting wafer fab equipment (WFE) spending to reach $122 billion in FY26 as TSMC gains market share due to AI accelerators.
TSMC's advanced node capabilities, particularly its 3nm process, have played a significant role in its success. Industry leaders like Apple and Qualcomm rely on TSMC's 3nm process for their latest high-end AI and mobile applications. This has led to a substantial increase in revenue from 3nm processes, which contributed 24% of wafer revenue in Q2-FY25, up from 15% YoY and 22% quarter-over-quarter (QoQ). Similarly, TSMC's advanced tech nodes (7nm and below) accounted for 74% of total wafer revenue in Q2-FY25, up from around 65% in prior quarters.
TSMC's leadership in advanced semiconductor node technology has driven its stock market growth and market share increase. Despite operational risks stemming from geopolitical tensions and supply chain issues, the company's strong performance and market dominance suggest a promising future. However, investors have yet to fully appreciate the company's true potential, presenting an opportunity for those who recognize TSMC's significant role in the AI chip market.
