Chip stocks climbed today following strong quarterly results from Taiwan Semiconductor Manufacturing Co (ADR) (NYSE:TSM), with the company reporting a record 35% profit increase in Q4, driven by robust demand for AI chips. The company also announced plans to invest $56 billion through 2026 to expand AI chip production.
TSMC’s US-listed shares rose 6.7% to about $349 in the early afternoon on Thursday. This lifted other semiconductor stocks. KLA Corp (NASDAQ:KLAC, XETRA:KLA) surged 8.9%, Applied Materials Inc (NASDAQ:AMAT, XETRA:AP2) was up 8%, ASML Holding NV (NASDAQ:ASML, XETRA:ASME) added 6.2%, Lam Research Corporation (NASDAQ:LRCX, XETRA:LAR) added 5.8, and Advanced Micro Devices Inc (NASDAQ:AMD, XETRA:AMD) gained 5.6%.
Analysts at Wedbush reiterated an ‘Outperform’ rating on TSMC following the earnings report, raising their 12-month price target to NT$2,200 from NT$2,000.
They highlighted that TSMC’s gross margin of 62.3% exceeded its initial guidance of 59% to 61%, and the company’s EPS outperformed expectations.
Wedbush noted management’s outlook for approximately 4.5% revenue growth in Q1 2026 and implied gross margins remaining above 60% for the year.
Looking further ahead, Wedbush said TSMC expects AI accelerator revenues to grow in the mid-50% range over five years, supporting nearly 25% overall sales growth.
“With TSMC firing on all cylinders and competitive risks still years away, the company remains one of our favorite names in hardware,” Wedbush analysts wrote.
The strong guidance for 2026 and AI-driven demand is also expected to benefit related companies, including NVIDIA, Broadcom, and semiconductor-cap equipment vendors, according to Wedbush.