The Motley Fool columnist Harsh Chauhan said Taiwan Semiconductor Manufacturing Co. ADRs (NYSE: TSM) could rise to more than $1,200 by 2030. Using his assumptions, the target comes to about $1,219, which he said would represent a near threefold increase.
In a column published on the 21st, Chauhan argued that even though AI stocks have recently pulled back, earnings from industry leaders still point to solid demand. He listed three reasons for the recent correction in AI names: interest rates staying high, inflation data coming in above expectations and reviving concerns about another rate hike, and higher financing costs for AI infrastructure.
Third-quarter results beat expectations
TSMC released its third-quarter results on the 15th. Revenue reached $46.72 billion, up 41.2% from a year earlier. In New Taiwan dollars, revenue was NT$1.4942 trillion, up 50.9%. Net profit after tax came to NT$763.06 billion, up 68.7%, while earnings per share were NT$29.43. On an ADR basis, EPS was $4.60. Both figures were record highs.
Margins also improved. Gross margin was 66.4% in the third quarter, and net profit margin rose to 51.1% from 45.7% a year earlier. The article also noted that TSMC shares in Taipei closed down 1.45% at NT$2,385 that day.
Advanced-node contribution increased
Process technologies below 7nm accounted for 79% of wafer revenue in the third quarter. Within that mix, 3nm contributed 33%, 5nm made up 28%, and 2nm accounted for 8%. Combined, 2nm, 3nm, and 5nm represented 69%, up from 60% in the same period last year.
Fourth-quarter revenue guide points to faster growth
TSMC forecast fourth-quarter revenue of $52.3 billion to $54.3 billion, with operating margin in a range of 56.5% to 58.5%. Using the midpoint, Chauhan estimated year-over-year revenue growth of about 58% for the fourth quarter, faster than the third quarter, and said operating margin would be 3.5 percentage points higher than a year earlier.
TSMC also raised its full-year U.S. dollar revenue growth forecast to about 44% from about 38%.
2nm pricing and profit assumptions
Chauhan said 2nm could support TSMC’s revenue and earnings over the long run. Citing market reports, he wrote that 2nm pricing is about 50% higher than 3nm. He also referred to reports that TSMC may raise advanced-node prices by 5% to 10% next year and advanced-packaging prices by 10% to 15%. TSMC has not formally announced any price increase.
For AI accelerators, TSMC had previously projected a compound annual growth rate in the mid- to high-50% range for revenue from 2024 to 2029. Chauhan said management may expect actual growth to come in faster, but based on the earnings call, Chief Executive C.C. Wei said demand was 「very strong」 without formally raising that forecast.
How the $1,219 target was calculated
Chauhan cited analyst estimates showing TSMC ADR earnings rising from $10.65 in 2025 to $29.82 in 2028, which implies a compound annual growth rate of about 40%. He then assumed another 43% annual increase in both 2029 and 2030, leading to projected ADR earnings of $60.98 in 2030.
For valuation, the article said the Nasdaq-100 currently trades at about 22 times forward earnings. Chauhan used a more conservative multiple of 20 times, which produced a 2030 ADR price target of about $1,219.
