TSMC Stock Hits New Peak as Advanced Chip Production and AI Demand Converge

Taiwan Semiconductor Manufacturing Company (TSMC) shares reached an unprecedented high on the final trading day of 2025, closing at $305.30. The record valuation is fueled by a powerful combination of a major technological milestone and intense supply chain pressures from a key client, setting the stage for continued expansion into 2026.

A significant driver of TSMC's current position is the overwhelming demand from its major customer, Nvidia. The AI chip leader is currently negotiating a substantial ramp-up in production for its H200 chips, slated to begin in the second quarter of 2026, to address a severe supply-demand imbalance.

The scale of the orders is staggering:
* Chinese technology firms have placed orders for over 2 million H200 chips for 2026.
* Nvidia's current inventory stands at only 700,000 units.
* With each chip priced at approximately $27,000, the potential revenue from these orders alone nears $54 billion.

This surge follows a U.S. government export license that permits shipping these advanced chips to China, subject to a 25% fee. Final import approval from Chinese authorities is still pending. Notably, ByteDance alone plans to spend around 100 billion yuan ($14 billion) on Nvidia GPUs in 2026.

Next-Generation 2-Nanometer Chip Production Commences

In parallel with this demand surge, TSMC has achieved a critical technological advance. The company officially initiated high-volume manufacturing of its 2-nanometer (N2) process technology in the fourth quarter of 2025. Production is underway at its Fab 20 facility in Hsinchu and its Fab 22 site in Kaohsiung, cementing its technological lead over rivals Intel and Samsung.

Should investors sell immediately? Or is it worth buying TSMC?

This new N2 node introduces nanosheet transistor architecture for the first time. According to TSMC, it delivers a 10% to 15% performance increase over the prior N3E generation at identical power, or alternatively reduces power consumption by 25% to 30% at matched clock speeds. These efficiency gains are pivotal for powering next-generation mobile devices and high-performance computing applications from clients like Apple and Nvidia.

Financial Performance and Analyst Outlook Reflect Strength

The company's operational momentum is evident in its financial results. TSMC reported November revenue of 344 billion Taiwan dollars, representing a year-over-year increase of 24.5%. Advanced technology nodes, defined as 7-nanometer and smaller, now contribute roughly 74% of total wafer revenue.

With a market capitalization hovering around $1.58 trillion, the stock trades at a trailing twelve-month price-to-earnings (P/E) ratio of 31.29. Equity researchers are bullish on further appreciation. Bank of America has established a price target of $360, while Bernstein raised its target to $330 in December. Both firms cite TSMC's planned expansion of its CoWoS advanced packaging capacity, which is expected to reach 125,000 wafers per month by the end of 2026. This expansion is essential for meeting the production needs of Nvidia's upcoming Blackwell and Rubin GPU architectures.

Global investment in artificial intelligence is projected to reach an estimated $1.5 trillion in 2025, and TSMC stands as a direct beneficiary of this capital expenditure wave. By simultaneously launching its most advanced chipmaking process and aggressively expanding capacity for current-generation products, the foundry giant has strategically positioned itself for sustained growth in the coming quarters.