25% upside potential expected! Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) praised by JP Morgan ahead of earnings: Strong guidance expected for Q1 2026 and full year, fundamentals driving valuation reshaping.

Chip manufacturing giant Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) will announce its fourth quarter 2025 performance this Thursday. Morgan Stanley recently released a research report stating that Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR is expected to provide strong guidance for the first quarter of 2026 and the full year. JP Morgan added that they believe the company's earnings per share forecast for the next few months will be further adjusted upward, maintaining a "hold" rating on Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR listed on the Taiwan Stock Exchange, with a target price of 2,100 New Taiwan Dollars by December 2026, which represents a 25% upside from the closing price last Friday. JP Morgan mentioned that Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR had revenue of 335 billion New Taiwan Dollars in December 2025, a year-on-year increase of 20.4% and a month-on-month decrease of 2.5%, resulting in fourth quarter revenue of 1.046 trillion New Taiwan Dollars, a year-on-year increase of 20% and a month-on-month increase of 6%. This aligns with JP Morgan's expectations. The bank believes that due to the weakening New Taiwan Dollar and increased capacity utilization, the gross margin for the fourth quarter of 2025 for Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR is expected to exceed guidance (the company's guidance range is 59%-61%, while JP Morgan's expectation is 62%). For the first quarter of 2026, JP Morgan believes that due to strong demand for N3 process capacity and an increase in the proportion of artificial intelligence (AI) business, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR is expected to provide guidance for flat quarter-over-quarter revenue, while JP Morgan's expectation is a 2% growth (measured in USD). JP Morgan further added that due to more rush orders, price increases for N4/N3 and CoWoS, improvement in the N3 product mix (increased proportion of high-performance computing), and the continuous weakness of the New Taiwan Dollar, the gross margin may rise again. The company is expected to provide guidance for a gross margin of 61%-63% for the first quarter of 2026, while JP Morgan's expectation is 63%. As for the full year 2026, JP Morgan predicts that Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR will provide guidance for revenue growth in the middle range of 20% (JP Morgan expected growth of 30% in USD) and will raise the compound annual growth rate of data center AI revenue in the 2024-2029 period to the middle range of 50% (JP Morgan expected 57%), with capital expenditure in 2026 between 46 billion USD and 50 billion USD (JP Morgan expected 48 billion USD). JP Morgan stated that their target price for December 2026 is 2,100 New Taiwan Dollars, based on a forward twelve-month price-to-earnings ratio of approximately 20 times, reflecting positive fundamental demand-driven factors. The main downside risks include: (1) any weakness in AI capital expenditure; (2) increased competition pressure from Intel Corporation; (3) rising memory costs leading to weak demand for smartphones.