To The Moon

$Taiwan Semiconductor Manufacturing(TSM)$ $ASML Holding NV(ASML)$ $NVIDIA(NVDA)$ 

🎯 Executive Summary

I’m convinced that Taiwan Semiconductor Manufacturing Company ($TSM) remains the heartbeat of global AI hardware despite short-term moderation in growth. October sales rose +16.9 % YoY to NT$367.47 B, signalling steady expansion even as the quarterly growth rate cooled from the explosive +41 % pace in Q3. This marked the slowest growth since February ’24 but remained in line with expectations. Q3 earnings were exceptional; revenue hit $33.1 B (+10.1 % QoQ / +40 % YoY), EPS $2.92 per ADR, and net income $15.1 B. Gross margin 59.5 %, a 200 bps beat above guidance, proved TSMC’s operational dominance.

I’m tracking the N3 capacity expansion to roughly 160 k wafers per month as Nvidia’s Blackwell orders accelerate into 2026, signalling a 50 % output lift anchored by sustained AI demand. I’m watching the volume surge build as traders reposition after the October sales print, with intraday volatility expanding 23 % above the 20-day average. I’m watching the Q4 setup closely. Management guided for +12–15 % QoQ revenue growth to NT$685–700 B (Bloomberg consensus aligned), with gross margin 59–61 % and operating margin 48–50 %. This forecast reflects durable AI-driven orders combined with a broad smartphone rebound, despite the emerging AI sustainability debate. Institutional flows remain strong, analysts have raised targets, and technically, momentum looks ready to rotate higher. This isn’t fleeting hype; it’s a multi-year rerating anchored in TSMC’s 58 % global foundry share, outpacing Samsung threefold.

💰 Financial Performance Breakdown

TSMC’s Q3 2025 results were a masterclass in execution:

• Revenue: $33.1 B (+10.1 % QoQ, ~ +40 % YoY)

• EPS: $2.92 (beat estimates by ~5 %)

• Gross Margin: 59.5 % (beat the high end of guidance by 200 bps)

• Operating Margin: 49.3 %

• Net Income: $15.1 B

• Free Cash Flow: NT$139.4 B (down from NT$199.9 B Q2 due to capex expansion)

• Advanced nodes (≤7 nm): 74 % of wafer revenue (3 nm 23 %, 5 nm 37 %, 7 nm 14 %)

Segment growth diversified; Smartphones rebounded +19 % QoQ to 30 % of sales, HPC (AI and data centres) was flat QoQ at 57 % share, IoT +20 % QoQ, Automotive +18 %. The strong smartphone comeback offset AI normalisation and FX headwinds.

🛠️ Strategic Headwinds & Execution Risk

I’m carefully tracking the emerging AI sustainability debate. October growth of +16.9 % YoY marks a downshift from earlier +30–40 % rates, which could indicate temporary digestion of AI infrastructure orders. Still, TSMC’s margin beat and Q4 guidance prove pricing power remains intact. FX pressure and overseas fab dilution persist as structural risks; management flagged 2–3 % margin drag from Japan, Germany, and US facilities. Free cash flow compression reflects elevated capex for capacity builds but underpins long-term scale. Overseas fab dilution from Japan, Germany, and the U.S. currently trims 2–3 % from margins, yet N2 yields are tracking 20–40 % ahead of Samsung’s trajectory, mitigating longer-term cost drag.

I’m also focusing on the N2 node outlook for 2026. Management expects superior profitability versus N3 as yields improve and tape-outs accelerate. Major customers have reportedly locked orders for early 2026 delivery, implying TSMC will retain leadership through the next cycle. This node transition is vital for maintaining pricing leverage as AI chips become more power-dense and memory-intensive.

🧠 Analyst & Institutional Sentiment

The Street has tightened its bullish stance. Barclays rates Overweight with a $400 PT, Needham reiterates Buy at $380, and Morgan Stanley sees fair value near $365. Consensus median target hovers around $360; about 25 % upside from current levels.

ETF flows confirm institutional confidence; TSM remains a top five holding in $SMH and $SOXX. FMR LLC added over 9.4 M shares last quarter (+18 %). Analysts call the results “a resounding signal that the AI trade is still alive and well.”

📉📈 Technical Setup

I see clear compression on the 4-hour chart with Keltner and Bollinger bands tightening around US$292. The 13, 21 and 55 EMAs are coiling near price support between US$290 and US$295. RSI has risen from the mid-30s to the high-40s, suggesting renewed momentum, while MACD has turned positive with a bullish crossover. The 21 EMA at $291.5 has crossed above the 50 DMA ($288.2), forming a golden cross that often precedes momentum expansions in semiconductors.

On the 30-minute chart, I see a clean bull flag structure after a swing from US$275 to US$295. Support sits at US$280–285 and resistance at US$300–305. If TSM breaks above US$305 with strong volume, I expect a move toward US$360 (base) and possibly US$400 (stretch). Bollinger band expansion and RSI crossing 60 would confirm trend continuation.

🌍 Macro & Peer Context

I’m tracking TSMC against $ASML and $NVDA as AI supply-chain leaders. While ASML trades at ~26× EV/EBITDA, TSM sits at just ~12×; a discount that underscores latent value. Both firms are integral to AI compute capacity, but TSM captures the volume side of the equation. Geopolitically, US tariff policy and Taiwan cross-strait tensions remain the main macro risks. However, the global rate-cut cycle expected in 2025 should favour semiconductor equities. TSMC now controls roughly 58 % of global foundry revenue, more than triple Samsung’s share, giving it unmatched AI leverage. October sales growth (+16.9 % YoY) already outpaces the sector’s aggregate expansion.

📊 Valuation & Capital Health

I see TSM as undervalued relative to its peers. EV/EBITDA around 12× versus ASML’s 26×, forward P/E near 18× versus peer averages above 25×. Cash reserves ~NT$2.8 T (≈ US$90 B) and manageable debt levels support continued capex of NT$287 B per quarter. Free cash flow remains strong despite heavy investment in N2 capacity. FCF yield remains attractive given margin stability and node leadership.

⚖️ Verdict & Trade Plan

I am bullish with a Buy bias. Entry zone: US$285–295. Stop loss: below US$275. Base target: US$360. Stretch target: US$400 within 12–18 months. Catalysts include Q4 earnings (Feb 2026), N2 progress updates, and AI infrastructure spending acceleration. I’ll add on any retest of US$290 support if volume remains strong.

🏁 Conclusion

I’m convinced TSMC isn’t merely surfing the AI swell; it’s the ocean floor engineering the currents themselves. The slowdown in growth is a pause for breath, not a pivot to decline. Margins, guidance, and technology leadership remain formidable. With N3 throughput ramping and N2 yields improving, this setup represents a 70 % probability of a structural rerating above $360 within six months. This setup is a structural rerating in motion, and I intend to stay positioned for the next leg up. Execution beats expectation, and right now TSMC is executing flawlessly.

📌 Key Takeaways

• October 2025 sales +16.9 % YoY to NT$367.47 B

• Q3 revenue $33.1 B (+10.1 % QoQ, +40 % YoY)

• Gross margin 59.5 % (200 bps beat); Q4 guidance 59–61 %

• Q4 revenue target NT$685–700 B (+12–15 % QoQ, per Bloomberg)

• EPS $2.92; net income $15.1 B

• Smartphone segment +19 % QoQ rebound; HPC flat QoQ

• Advanced nodes = 74 % of wafer revenue

• RSI rising >50, MACD bullish; support US$285, resistance US$305

• Base target US$360; stretch US$400

• N2 node to launch 2026 with higher profitability than N3

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