TSMC (TSM) Stock Price Forecast: Everyone Wants One Answer From TSMC Earnings
TSMC (NYSE: TSM) reports Q2 earnings on July 16. Here's why AI demand, margins, and capital spending matter more than another record...
Quick overview
- TSMC's Q2 earnings report emphasizes the importance of production capacity and execution over just revenue figures, as AI chip demand remains strong.
- AI chips now account for nearly 61% of TSMC's revenue, highlighting its critical role in the global AI supply chain.
- Investors are focused on TSMC's guidance regarding gross margins and capital expenditures, which will impact future profitability and expansion plans.
- The stock's upward momentum depends on maintaining support around $418.95, with potential targets set at $433 and $448.
TSMC (NYSE: TSM) reports Q2 earnings on July 16. Here’s why AI demand, margins, and capital spending matter more than another record revenue quarter. TSMC (NYSE: TSM) releases its earnings for the second quarter today, and everyone is well aware at this point that there is no lack of demand for AI chips. The big question at this point is if the Taiwan Semiconductor Manufacturing Company can expand its production capabilities at a high-enough rate to satisfy the likes of NVIDIA, AMD, and Apple without running into a bottleneck on its margins.
With the stock having rallied hard this year, Wall Street is not looking for another blow-out quarterly result. Rather, they just need to be convinced that the infrastructure buildup for the AI revolution is not close to over.
AI Demand Isn’t the Story Anymore; Execution Is
Taiwan Semiconductor Manufacturing (NYSE: TSM) just reported preliminary second-quarter revenue of NT$1.27 trillion (approximately $39.6B) to a very warm reception, easily surpassing expectations and coming in up 36% on a year-over-year basis. The June quarter was up nearly 68% on an annual basis, signaling that demand is still accelerating into this quarter instead of peaking.
Roughly 61% of the overall foundry business is now composed of AI chips, which confirms TSMC’s position as a linchpin in the global AI supply chain. All of the major AI infrastructure players, from NVIDIA and AMD to Apple, are counting on the foundry. Which means all eyes on today’s earnings call do not need to focus on the question of demand.
We all know it is still strong; it is a matter of how effectively can TSMC scale its production without getting stuck at the front of a very long line.
Can TSMC Keep Up With the AI Boom?
There is nothing new here. The biggest obstacle that TSMC is grappling with is not in finding customers for its chip production, it is simply manufacturing enough of them. Advanced CoWoS packaging is currently one of the main bottlenecks that is limiting the supply of AI accelerators, while demand continues to surge past supply capacity.
To solve this problem, the foundry is ramping up production on the back end of its manufacturing line, expecting to see roughly 125,000 CoWoS wafers going into the second half of 2026.
TSMC also has to share how it is guiding its gross margins, which are currently between 65.5% and 67.5%, along with how much its annual spending will be at $52B-$56B, which may have some impact on future profitability as well.
Increased spending would help support the growth rate going forward, but it may also come with some increased risk to the execution of the company’s expansion plans, which includes a large facility build in Arizona, as well as the expansion of fabs in Japan and Germany while the core hub remains in Taiwan with the advanced packaging.
Wall Street Wants Confidence, Not Just Record Numbers
Consensus estimates point to another record quarter, with analysts expecting net income of roughly NT$633 billion and earnings of around $3.82 per ADR. Those numbers do not matter as much at this point as to what management may say on its call today, which will likely include commentary on raising its full-year outlook and providing further insights into how the AI demand is trending from the major hyperscalers.
There may also be some details given on the company’s ability to scale its advanced packaging capacity and production.
With how much of the stock price is driven by its AI growth story, Wall Street may not need to see another earnings beat to support further price gains in this stock. The big question is more centered around how well the company is executing on the plans needed to scale to meet the demand it is experiencing. This is much more important than just another top line number.
TSMC (TSM) Stock Forecast: Support Zone Holds as Bulls Eye Recovery Toward $447
Taiwan Semiconductor Manufacturing (NYSE: TSM) stock is trading at $423.30 during the 4 hour time chart after finding a strong bid near a key support range between $406.61 and $418.95. The stock has also been able to reclaim its long-term rising trendline, which suggests buyers are defending the current technical setup from the price correction earlier in the week.
Price has dropped below the 50-period EMA, now at $434.48, while remaining above the 200-period EMA at $422.78, which has kept the long-term uptrend alive despite the price weakness in the short-term chart.
It would be good to see TSMC break above $433.04 to improve the bullish outlook, with $447.93 standing as the next major hurdle. If bulls succeed in pushing through that barrier, price would revisit the previous highs near $459.41.
On the flip side, it would be a bad sign for the stock if price were to close below $418.95, in which case the stock would drop toward a strong support at $406.61 that has served as a base of strong buy-side interest previously. The RSI is around 44, showing little bearish momentum is left to come. This leaves room for a rebound in the price, as long as buyers defend the support area and the long-term trend line.
As long as the $418.95 support zone holds in the long-term technical picture, the bulls would be able to push TSMC stock higher, at the very least toward the $433 to $448 zone. Losing that support, however, would likely push buyers to the sidelines for further price action. That would shift attention toward $406.61 instead, and it may not be an optimal place for bulls to take their chances on the next rebound.
Key Takeaways
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TSMC is releasing its earnings report today, where guidance and insights on its capacity to ramp production of AI chips in the coming quarters will be a higher priority than just the top-line earnings results.
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The share of revenue derived from the company from AI chips is now nearly 61%, reaffirming TSMC’s pivotal role as an intermediary between the demand for chip processing in AI data centers globally and the manufacturing side of the AI revolution.
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Wall Street will pay careful attention to the guidance of the company’s gross margins, the pace at which it plans on expanding its capacity to build advanced CoWoS packaging, and the total capital expenditure of the company for its growth and expansion plans.
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For TSMC to continue the upward price action it experienced this year, the support zone at $418.95 would remain a key level for buyers to maintain in the near term, with the next target on the way to $448 if the bulls are able to break through that price level.
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