Taiwan Semiconductor Manufacturing: Is Now the Real Time to Invest After Record Highs?

With Taiwan Semiconductor Manufacturing (NYSE: TSM) hitting new all-time highs, investors are debating whether it’s still the right moment to jump in. The answer might surprise you. As artificial intelligence continues to reshape industries globally, Taiwan Semiconductor remains at the epicenter of this transformation, serving as the critical manufacturing backbone for the chips powering next-generation AI systems.

Why TSM’s Profit Growth Matters Now: 35% Surge Signals Strong Fundamentals

The most telling aspect of Taiwan Semiconductor’s performance isn’t just its revenue growth—it’s the acceleration in profitability. In the most recent quarter ending December 31, 2025, the company reported a 35% year-over-year increase in net income, marking the eighth consecutive quarter of bottom-line expansion. This is particularly significant when viewed against the company’s 21% revenue growth rate for the same period.

What this tells us about the business now is critical. Taiwan Semiconductor’s operational efficiency has reached impressive levels, with profit margins hovering around 50%. This means the company isn’t just selling more chips; it’s extracting substantially more value from each sale. As demand for AI semiconductors continues to accelerate in 2026, this high-margin business model provides Taiwan Semiconductor with significant financial flexibility to invest in capacity expansion and maintain its technological edge.

For investors evaluating Taiwan Semiconductor at the present time, these profit margins represent a competitive moat that’s difficult for competitors to replicate. The combination of revenue growth and margin expansion creates a powerful earnings growth trajectory.

Taiwan Semiconductor’s Valuation in 2026: Still Attractive Despite Market Cap Growth

At approximately $1.7 trillion in market capitalization, Taiwan Semiconductor ranks among the world’s most valuable companies. This raises a natural question: Has the valuation become disconnected from reality?

The most useful lens for evaluating the company at this point is the price-to-earnings (P/E) multiple. Taiwan Semiconductor’s forward P/E ratio—based on analyst estimates for the upcoming year—stands at around 26 times earnings. While this is notably higher than the S&P 500’s average forward P/E of 22, the premium may be justified given the company’s positioning.

Consider the context: Taiwan Semiconductor is the dominant player in a market that’s expanding at an extraordinary pace due to AI adoption. The company has unmatched expertise in producing the most advanced semiconductor nodes, which command premium pricing. For a business in this category with sustained double-digit earnings growth, a P/E multiple in the mid-20s isn’t unusually expensive—it reflects the market’s recognition of Taiwan Semiconductor’s structural advantages.

Timing Your Entry: Current Opportunities and Risk Considerations

The question investors face now isn’t whether Taiwan Semiconductor is worth owning—the fundamentals suggest it is. Rather, it’s whether the recent rally has created the optimal entry point.

Taiwan Semiconductor has risen 50% over the past 12 months, which naturally raises concerns about valuation after such a move. However, several factors suggest the upside story remains intact:

• AI tailwinds extending further: Demand for AI chips is likely to intensify throughout 2026 and beyond as companies invest heavily in AI infrastructure
• Manufacturing capacity premium: As the world’s leading advanced chip manufacturer, Taiwan Semiconductor stands to capture disproportionate share of this growth
• Earnings growth outpacing valuation: If profits continue to expand faster than stock price gains, the P/E multiple could actually compress despite the stock rising further

The flip side: Taiwan Semiconductor’s stock is at record levels, which means entry points at lower valuations may appear in the months ahead if market volatility increases. Investors with a multi-year horizon might consider dollar-cost averaging into positions rather than deploying all capital at once.

The Bottom Line on Taiwan Semiconductor Right Now

Taiwan Semiconductor’s fundamentals have never looked stronger—strong profit growth, expanding margins, and a dominant position in a high-growth market. The stock’s recent all-time high doesn’t automatically make it a bad investment in 2026.

For investors focused on AI exposure and willing to accept valuations in the mid-20s P/E range for a world-class compounder, Taiwan Semiconductor still warrants consideration. The company’s ability to grow earnings in the 20-30% range annually means even current valuations could look attractive within a few years.

Timing is always challenging when investing, but for Taiwan Semiconductor, missing the opportunity to own a best-in-class business might prove costlier than buying at current levels.