Taiwan Semiconductor Manufacturing Company Limited (TSMC) is poised to become a primary benefactor in the unfolding landscape of artificial intelligence (AI) and data center investments. Major players like Amazon, Microsoft, Alphabet, and Meta Platforms are set to invest approximately $650 billion in data center capital expenditures by 2026, and TSMC stands at the forefront of this technological revolution.
Whether companies opt for NVIDIA GPUs or custom chip solutions from Broadcom, the likelihood is high that these advanced semiconductors were produced in a TSMC facility. This positions TSMC uniquely as one of the few genuine “picks and shovels” opportunities in the AI sector, ensuring it flourishes irrespective of which company achieves supremacy in AI model development or hardware sales.
The challenge of entering the chip foundry space is monumental. Intel’s venture into this realm, for example, has not gone as planned, while Samsung, despite its capabilities, does not possess the necessary scale to compete effectively. This leaves TSMC largely unchallenged at the leading edge of chip manufacturing, fortifying its market position.
DA Davidson Gives TSM a Green Light
On February 12, 2026, DA Davidson initiated coverage of TSM with a Buy rating and a price target of $450—approximately 21% above the stock’s trading price of $370.54 on February 20, 2026. The firm emphasized TSMC’s adeptness at translating new chip architectures into high-yield, high-volume manufacturing as the cornerstone of its competitive advantage.
While competitors may replicate specific specifications theoretically, DA Davidson argues that TSMC’s true strength lies in its unrivaled execution at scale, a formidable moat that has taken years to develop and is not easily replicated.
Moreover, TSMC’s management appears equally bullish, predicting that AI chip revenue could witness an astonishing compound annual growth rate (CAGR) of nearly 60% from 2024 to 2029. This sustained growth trajectory underscores the longevity of the AI expansion phase.
Assessing TSM’s Valuation
Despite the growing momentum and investment potential, TSM is not irrationally priced. Trading at roughly 26 times forward earnings, it remains competitively valued compared to the S&P 500’s 22 times. Given TSMC’s integral role in the AI supply chain, this valuation does not appear excessive.
Currently, TSM’s stock range demonstrates significant volatility, with prices fluctuating from $134.25 to $380.00 over the past year and boasting a market capitalization of $1.9 trillion. Additionally, it offers a dividend yield of 0.83%, providing a modest yet tangible benefit to investors focused on growth.
TSMC’s gross margin stands at an impressive 59.02%, indicating robust pricing power that is characteristic of dominating market players. Notably, the company is also expanding its manufacturing capabilities on U.S. soil, further solidifying its long-term strategic positioning and mitigating geopolitical risks that have affected its stock previously.
Moreover, billionaire investor Stanley Druckenmiller recently identified TSMC as one of his top ten stock picks, reflecting confidence in the company’s growth potential.
With DA Davidson’s ambitious price target of $450 dating back to February 12, 2026, TSMC seems to be on the cusp of unprecedented opportunities, reinforcing its status as a powerhouse within the chip manufacturing industry amid the AI boom.
