Market AnalysisJun 29, 20262 Min

Why is Taiwan Semiconductor becoming a market-favourite?

Taiwan Semiconductor Manufacturing Co. Ltd (TSMC), the world’s largest contract chipmaker by capacity, is probably going through its best phase as the global semiconductor demand is skyrocketing, thanks to the artificial intelligence (AI) boom.

Experts are calling TSMC, which manufactures the most advanced chips in the market, one of the safest bets in the stock markets right now amid the disruption caused by AI across sectors.

This week, investment bank UBS raised its price target on TSMC on the grounds that the company was set to see strong growth on outsized chip demand from the AI industry.

The brokerage raised TSMC’s price target to T$3,400 from T$3,000 and maintained its ‘Buy’ rating on the stock while raising the company’s 2026 sales growth forecast.

Last week, financial services company Bank of America (BofA) also lifted the price target on NYSE-listed TSMC shares to $590 from $490 and maintained a ‘Buy’ rating.

BofA raised TSMC sales expectations in 2026 and 2027 to 40% and 39% year-over-year, respectively, in the backdrop of rising AI demand.

The positive commentary came after TSMC CEO C.C. Wei told investors earlier this month that the company would “grow by above 30% in US dollar terms” for full-year 2026. The statement came when TSMC announced that its monthly revenue for May 2026 hit NT$416.98 billion (~$13.25 billion), up 30.1% year-over-year.

Notably, TSMC remained the most profitable company in Taiwan amid the AI boom in 2025, according to a report. The company topped the ranking by both revenue and net profit for the first time among the 5,000 largest companies of Taiwan.

TSMC critical for AI expansion

TSMC is one of the largest suppliers of AI chips. It is producing semiconductors for companies including Nvidia and Advanced Micro Devices and counts Broadcom, Apple and other tech companies as its key customers.

The chipmaker has seen a sharp uptick in demand in recent years and is now working to increase capacity to offset a potential supply shortfall.

“We see a higher capex commitment as critical to alleviating client concerns around supply constraints and the need for second-source diversification,” UBS analysts said in a note. The tight supply situation may also push TSMC to potentially hike prices by early-2027.

TSMC shares listed on the Taiwan Stock Exchange have already climbed nearly 124% over the past one year and about 50% year-to-date.