Taiwan Semiconductor Manufacturing builds most of the world's advanced AI chips, even though Nvidia and Advanced Micro Devices get the headlines. The foundry controls most of the pure-play foundry market, and its revenue and margins have climbed through 2026 as the AI buildout continues.
Nvidia and AMD design the GPUs that get most of the AI coverage, and Micron builds the memory chips layered alongside them. None of the three manufacture their own products — that work falls almost entirely to Taiwan Semi's fabs, which hold roughly 73% of the pure-play foundry market and reportedly closer to 90% of the market for the most advanced nodes.
Nvidia overtook Apple as TSMC's top customer
Apple was credited for years as Taiwan Semi's largest customer. However, Nvidia took over that title earlier this year, a shift that tracks the AI infrastructure cycle. High-performance computing, the segment covering AI accelerators and related server silicon, has become the company's core growth engine. Management points to AI-accelerator revenue compounding in the mid-to-high 50% range through the end of the decade, and it lifted its longer-term company revenue growth outlook toward at least 25%.
Revenue and margins climbed through 2026
Full-year 2025 revenue reached about $122 billion, up nearly 36% year over year, while gross margin climbed to 60% from 56% the year before. Through the first half of 2026, Taiwan Semi's revenue grew 37% year over year to $76.1 billion, while gross margin expanded into the mid-60% range.
The company is also spending heavily on capital expenditures to stay ahead of demand. Customers cannot easily dual-source manufacturing for leading-edge nodes, which keeps Taiwan Semi's revenue and profit tied to the duration of the AI infrastructure supercycle rather than to any single product launch.
Valuation sits below the chip designers it supplies
Trailing price-to-earnings for the stock is near 34 times. The forward P/E stands at 28 against a company still expected to grow revenue at a high double-digit percent rate. Nvidia and AMD capture more of the narrative premium because their products are visible, while Micron rides the memory upcycle AI also requires. Geopolitical risk around Taiwan, and the cost of building fabs in the U.S., remain factors investors weigh against the foundry's position in the AI supply chain.
Source: Fool
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