Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) Gets Bullish Call from Goldman Sachs Group, Inc. Ahead of Earnings: Strong AI Demand Supports Growth Momentum Extending Through 2027, Stock Still Has Nearly 40% Upside

Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) will report its third-quarter 2026 results on October 15. In a research report released recently, Goldman Sachs Group, Inc. pointed out that Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's strong earnings growth momentum is expected to extend through 2027, while capital expenditure will gradually increase to support long-term demand. Goldman Sachs Group, Inc. reiterated its "Buy" rating on Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, raised its target price for Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's Taiwan-listed shares from NT$3,100 to NT$3,300, implying nearly 28% upside from last Friday's closing price; its target price for Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's U.S. shares was raised to $660, implying nearly 40% upside from last Friday's closing price. Q3 and Q4 revenue to continue strong sequential growth, limited margin dilution from N2 capacity expansion Supported by persistently strong artificial intelligence (AI)/high-performance computing (HPC) demand, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's third-quarter revenue is expected to grow 15.3% sequentially, followed by a further 11.0% sequential increase in the fourth quarter of 2026 (both in U.S. dollar terms). On profitability, Goldman Sachs Group, Inc. expects Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's gross margin to edge down to 67.5%/67.3% in the third/fourth quarter of 2026, respectively, below 67.7% in the second quarter of 2026, reflecting the dilution effect from the continued ramp-up of N2 capacity expansion. Broader AI demand provides support, growth momentum extends through 2027 Goldman Sachs Group, Inc. expects that, as demand for AI GPUs/AI ASICs, networking equipment, and server CPUs continues to expand, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR will close out 2026 strongly and carry its growth momentum into 2027. Notably, stronger CPU demand driven by agentic AI is a key change that has emerged over the past year. The firm expects Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's 2026 revenue to grow 42.0% year over year in U.S. dollar terms; 2027 revenue to grow 36.9% year over year in U.S. dollar terms, above its previous forecast of 32.0%. At Goldman Sachs Group, Inc.'s Communacopia + Technology conference, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's management emphasized that lower token costs should stimulate further growth in AI usage. At the same time, discussions with customers and U.S. cloud service providers (CSPs) further strengthened Goldman Sachs Group, Inc.'s confidence in demand and infrastructure readiness. The firm believes these trends will support continued strong demand for advanced process nodes, especially N2 and N3. Even as Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR further expands capacity, management still expects supply of these two nodes to remain persistently tight. On the supply side, Goldman Sachs Group, Inc. expects new capacity additions, conversion of N5 capacity to N3, and efficiency improvements to support higher wafer output, while continued expansion of CoWoS capacity will help enable related wafer shipments. The firm expects gross margin to improve modestly to 67.5% in 2027, up from 67.2% in 2026, mainly supported by higher pricing, a favorable product mix, persistently high capacity utilization, and continued efficiency gains. EPS forecast adjustments Goldman Sachs Group, Inc. raised its earnings per share forecasts for Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR for 2026/2027/2028 by 1%/7%/8%, respectively, due to: 1) expectations that gross margin dilution from N2 capacity expansion will be less than previously expected, leading to higher gross margin assumptions; and 2) higher capacity utilization (UTR) assumptions given stronger AI/HPC demand, particularly for N2/N3 nodes. Higher capex to support long-term expansion Goldman Sachs Group, Inc. expects Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR to further increase capacity investment to support customers' long-term demand. The firm maintained its 2026 capex forecast for Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR at $64 billion, while raising its 2027/2028 capex forecasts to $85 billion/$98 billion, respectively, from previous forecasts of $78 billion/$82 billion, to incorporate: 1) cost inflation from equipment suppliers; and 2) initial spending related to a potential new Texas expansion project. However, the firm expects the new site to enter mass production only after 2032. On capacity, Goldman Sachs Group, Inc. continues to expect N3/N2 capacity to reach 200k wafers/month/140k wafers/month by the end of 2027/2028, respectively, and 220k wafers/month/200k wafers/month by the end of 2028. Other key focus areas Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's management will hold an earnings call on the same day it reports third-quarter results. Goldman Sachs Group, Inc. highlighted several key points analysts will focus on. Long-term AI growth outlook. Goldman Sachs Group, Inc. believes that AI demand expanding further from accelerators to CPUs and networking equipment will further support Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's long-term growth opportunity. The firm hopes management will update its key assumptions for the AI outlook through 2030, including where demand drivers have strengthened most over the past year and what factors could materially change this outlook. Long-term capex outlook and U.S. expansion. As customer demand continues to drive investment in advanced-node capacity and advanced packaging, Goldman Sachs Group, Inc. hopes management will provide further detail on the trajectory of long-term capex and the demand visibility supporting these investment decisions. The firm also hopes management will update its comments on whether customer demand could drive Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR to further expand its U.S. operations beyond its existing Arizona site, as well as the possible timing and scale of such investment. Foundry competition and technology leadership. Goldman Sachs Group, Inc. said it hopes to learn management's views on the evolving competitive landscape, including Intel Corporation, Samsung, and Terafab, and the implications of these changes for Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's long-term market positioning. In particular, the firm hopes to gain further insight into Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's technology leadership and whether management expects this gap to widen or narrow in future process generations. Summary Goldman Sachs Group, Inc. said it is bullish on Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR because it believes that, as the global foundry leader, its strong technology leadership and execution capabilities make it better positioned than peers to capture the industry's long-term structural growth opportunities, especially in areas such as AI/5G/HPC/electric vehicles (EVs). Goldman Sachs Group, Inc. believes Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR will achieve its 25% revenue compound annual growth rate (CAGR) target over the next several years, while maintaining long-term gross margin above 56%. The firm also noted that Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's valuation is attractive, with the current share price at the midpoint of its 10-year trading range.