Taiwan Semiconductor Manufacturing Co. (TSMC) reported impressive earnings and issued buoyant guidance that led Morningstar to raise its fair value estimate on the stock by 42% to TWD 2,700. TSMC is the world’s largest contract chip manufacturer with 70% market share in 2025, benefiting from semiconductor industry trends and long-term growth factors like AI and IoT applications. TSMC’s wide moat rating comes from its leading position in advanced process technologies, resulting in a cost advantage and high returns on invested capital. Morningstar projects TSMC to achieve low-20s returns on invested capital in the next five years, with a fair value estimate of TWD 2,700 and a projected 20.9% compound annual growth rate over the next five years. Risks for TSMC include operating in a cyclical industry, client concentration, intellectual property theft, and land acquisition challenges, but currency risk is limited. TSMC bulls believe the company will consistently earn higher gross margins than competitors and benefit from advanced processing systems and the fabless business model, while bears are concerned about pricing pressure from maturing process technologies and competition from other state-supported foundries.

Read more at Morningstar: TSMC: A Top Stock to Buy After a Big Change in Its Forecast