Taiwan Semiconductor Manufacturing (TSM) Stock May Still Look Cheap On Record AI Earnings

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Taiwan Semiconductor Manufacturing stock has delivered a very strong 378.6% return over the past three years, which puts fresh attention on whether the current price still lines up with what its valuation checks suggest.

A roughly 3.8x three year return signals that expectations for Taiwan Semiconductor Manufacturing have reset sharply higher and leaves investors more exposed if those expectations change. Heavy spending to expand advanced chip capacity can support long run earnings power, while tighter export controls on AI chips to China may limit how much value the company can ultimately realise from this demand. The company screens as undervalued on some metrics, but its 3 out of 6 valuation checks point to a mixed picture rather than a clear bargain or clear overvaluation.

The issue now is whether Taiwan Semiconductor Manufacturing's strong share price run has already absorbed most of the good news, or if the current level still offers a reasonable entry point on valuation grounds.

Taiwan Semiconductor Manufacturing delivered 114.4% returns over the last year. See how this stacks up to the rest of the Semiconductor industry.

Does Taiwan Semiconductor Manufacturing Look Undervalued on Earnings?

The P/E ratio suits Taiwan Semiconductor Manufacturing because earnings remain a core focus for how investors frame the stock. At around 32.7x, the current P/E sits well below the semiconductor industry average of about 75.5x and the peer group average of roughly 77.4x. This is the case even though Taiwan Semiconductor Manufacturing is a major player in advanced chip production.

The fair P/E multiple from the model blends factors like growth prospects, margins, size and risk, and comes out at about 61.8x, almost double the current P/E. Despite recent headlines around export controls and capacity expansion, the stock is still priced at a sizeable discount to where this framework suggests it might trade based on its profile.

On the P/E multiple, Taiwan Semiconductor Manufacturing stock currently screens as undervalued relative to its modelled fair ratio and broader semiconductor peers.NYSE:TSM P/E Ratio as at Jul 2026

See what the numbers say about this price — find out in our valuation breakdown.

The Taiwan Semiconductor Manufacturing Narrative: What Would Justify Today's Price?

Simply Wall St Narratives for Taiwan Semiconductor Manufacturing pick up where the valuation puzzle leaves off by spelling out in plain terms which paths for growth, margins and earnings would need to play out for the stock to be worth materially more or less than it is today on the Community page. Where a single ratio or model outputs one number, these scenarios outline the future that number is built on, so you can watch whether those conditions actually hold over time.

Story Continues

One of the top community narratives on Taiwan Semiconductor Manufacturing: 25% overvalued

"That tension, between the most magnificent business economics I have ever studied and the most sobering geopolitical risk I have ever priced, is the entire intellectual challenge of owning TSMC…"

Read one of the top narratives on Taiwan Semiconductor Manufacturing

Do you think there's more to the story for Taiwan Semiconductor Manufacturing? Head over to our Community to see what others are saying!

The Bottom Line

Taiwan Semiconductor Manufacturing screens as undervalued on its P/E multiple compared with both peers and its own tailored fair ratio, but the broader valuation checks are mixed rather than a clean signal. The strong move in the share price means the gap between the current market price and that multiple-based view now hinges more on how much earnings strength the market is already baking in. For you, the crux is whether Taiwan Semiconductor Manufacturing's discount reflects an overly cautious read on geopolitical and policy risk, or a fair price for owning a world class chip producer with real uncertainty around how much of the AI demand wave it can safely capture.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include TSM.

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