Taiwan Semiconductor Manufacturing Company (TSM) Pitch

Published on 30 July 2025 at 13:47

By: Austin Pinney

TSMC is currently trading at $243/share. I believe it is a buy, and I estimate a target price of $362 based on a detailed DCF valuation. TSMC has a market capitalization of approximately $1.01 trillion and an enterprise value of around $950 billion. The company holds about $90 billion in cash and has $32.2 billion in debt, giving it a net cash position of roughly $58 billion.

 

Its 52-week high is $249.23, and the low is $84.01. TSMC pays a modest dividend, currently yielding about 1.0%.

 

Why I like TSM:

 

  • World’s largest and most advanced chip foundry, producing ~60% of global semiconductors and over 90% of the most advanced chips.

  • Unmatched technology lead, with 3nm in mass production and 2nm expected in 2025–2026.

  • Strategic partnerships with NVIDIA, Apple, AMD, and Qualcomm — TSMC is the backbone of AI and mobile chip supply chains.

  • Strong financials, with $31.8 billion in free cash flow and a net income margin of ~43%.

  • Large and growing end markets, including AI accelerators, hyperscale data centers, automotive, and IoT.

  • Global expansion, with new fabs in the U.S., Japan, and Germany to reduce geopolitical risk.

  • Rock-solid balance sheet, holding $58 billion in net cash and very manageable debt.

  • High ROE and robust operating margins, even through semiconductor cycles.

Risk Factors:

 

  • Geopolitical tensions, particularly around China and Taiwan, remain the biggest strategic threat to operations and investor sentiment.

  • Rising competition from Samsung Foundry and Intel’s expanding foundry ambitions.

  • High capital expenditure requirements, with over $38 billion in planned capex in 2025 alone.

  • Talent retention and IP protection, especially as TSMC grows its international footprint.

  • Currency exposure, as most expenses are in New Taiwan dollars (TWD) while revenue is largely USD-denominated.

Why TSMC is a good stock to buy at today’s price:

 

I performed a DCF valuation of the company, assuming free cash flow grows at 16% annually for the next 10 years. Using a 10% discount rate and a terminal growth rate of 4%, we estimate TSMC’s enterprise value at ~$1.396 trillion. Adding in net cash of $58 billion and dividing by approximately 25.93 billion shares, we arrive at a target stock price of ~$362/share. At the current price of $243, this implies ~49% upside. If TSMC maintains its leadership in advanced chip manufacturing and benefits from surging AI-related demand, we believe the stock can reach or exceed that level. That’s why I believe TSMC is a compelling long-term investment at today’s price.