TSM

AI chip and memory leaders MU, INTC and TSM stand out for August as AI demand, growth and targets support upside.

TSMC remains a buy as robust growth, margin improvement, and capacity expansion plans reinforce the bullish thesis. Q2 revenue grew 36.0% YoY in local currency, with HPC leading at 66% growth and 2nm technology beginning to contribute meaningfully. Gross margin expanded 9.1 percentage points YoY, with Q3 guidance indicating further margin improvement and revenue acceleration.

TSMC (TSM) remains a BUY, with a 15% upside to a $475 target, driven by robust AI-led demand and a clear technology roadmap. Despite a post-earnings dip on margin and CapEx concerns, TSM's advanced node visibility (N3/N2/A16) and customer lock-in underpin multi-year revenue growth. Margin dilution from overseas fab investments, especially Arizona, tempers near-term GPM forecasts, but is viewed as a strategic necessity for US demand.

Taiwan Semiconductor ups its 2026 capital budget to as much as $64 billion, betting on long-term AI and HPC demand while expanding capacity without expected bottlenecks.

The semiconductor market, which has significantly outperformed the broader market in 2026 is seeing a pullback in July. The factors driving this rise include aggressive profit-taking, valuation concerns, and unwinding leveraged trades following a historic AI-fueled rally.

Artificial intelligence (AI) infrastructure is hitting a physical wall. As large language models grow exponentially in size, the legacy approach of throwing large, monolithic graphics processing units at the problem breaks down during the inference phase.

Taiwan Semiconductor Manufacturing Company delivered strong Q2 results, with EPS up 74% and revenue up 34%, but shares declined on CapEx concerns. TSM's elevated CapEx guidance ($60–64B) and $100B expansion plan raised market worries, yet margins and free cash flow expanded robustly. Despite near-term volatility risks from spending and margin contraction, TSM's AA-rated balance sheet and competitive moat support long-term upside.

Taiwan Semiconductor (TSM -1.42%) is arguably the best manufacturing company in the world.

Semiconductor exchange-traded funds have gained more than 25% this year. Intel Corporation's (INTC) second-quarter earnings report after today's close could test whether that rally continues.

Nvidia, Taiwan Semiconductor, and ASML dominate the AI semiconductor supply chain, each exerting significant pricing power. TSM plans a 10% price increase next year, following tensions with ASML over equipment pricing and delayed manufacturing line installations. AI operational costs remain high, with enterprise token expenses for advanced applications scaling rapidly and impacting the economics of AI adoption.