Taiwan Semiconductor Manufacturing (TSM 4.37%), popularly known as TSMC, is a key player in the global artificial intelligence (AI) infrastructure ecosystem, manufacturing chips for all the major companies that design AI chips.
This explains why TSMC stock has delivered healthy gains of 104% to investors over the past year, significantly outperforming the S&P 500‘s 15% gain over the same period. Shares of TSMC are now trading at $370 following the company’s stellar surge. But will this foundry giant be able to sustain its momentum and head to $500?
Image source: TSMC.
TSMC’s catalysts suggest that its earnings growth is sustainable
TSMC clocked a 51% increase in earnings in 2025, to $10.65 per share, driven by a 36% increase in the top line. The semiconductor bellwether’s earnings grew faster than its revenue, driven by impressive pricing power.
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TSMC is the world’s biggest semiconductor foundry with an estimated share of 72% in the pure-play foundry market, according to Counterpoint Research. Meanwhile, the company estimates that it controls just over a third of the Foundry 2.0 market, which includes chip packaging, testing, and other verticals in addition to the pure foundry business model.
However, Counterpoint Research estimates that TSMC’s share of the Foundry 2.0 market stood at 39% in the third quarter of 2025, up six percentage points from the prior year. TSMC leads this space as well, with the second-place company holding just 6%. Moreover, TSMC’s Foundry 2.0 rivals are growing at a much slower pace.
TSMC’s strong presence in this market gives it robust pricing power. The company is anticipated to increase the prices of the chips it manufactures for clients such as Nvidia, Advanced Micro Devices, Broadcom, Qualcomm, Apple, and others through 2029. This should ideally result in a larger increase in its earnings going forward than analysts’ expectations.
Specifically, analysts are expecting a 34% increase in TSMC’s earnings this year, followed by a gradual slowdown in its growth rate over the next couple of years.
TSM EPS Estimates for Current Fiscal Year data by YCharts
However, don’t be surprised if the company significantly exceeds those expectations. That’s because TSMC is expecting a 30% increase in revenue this year and points out that its AI accelerator revenue is poised to increase at a mid-to-high 50% range through 2029. These factors could eventually enable TSMC to easily hit $500.
How long will it take the stock to reach $500?
The chart shows that TSMC’s earnings could jump to $19.24 per share in 2028. However, it could clock faster growth due to the factors discussed. Assuming TSMC clocks even $20 per share in earnings in 2028 and trades at 25 times earnings at that time, in line with the S&P 500 index’s average earnings multiple, the stock price will hit $500.
That suggests a potential jump of 35% from current levels. However, it won’t take this AI stock another two to three years to reach the $500 mark, as its potential to clock faster-than-expected growth is likely to be rewarded with a premium multiple in the market.
Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
