TLDR
- DA Davidson began covering TSM on February 12, 2026, assigning it a Buy rating and a $450 price target.
- The four key AI hyperscalers — Amazon, Microsoft, Alphabet, and Meta — plan to allocate approximately $650 billion to data center capital expenditures in 2026.
- TSMC is the leading chip foundry, serving clients such as Nvidia, AMD, and Broadcom.
- The company’s management forecasts AI chip revenue will expand at a nearly 60% compound annual growth rate (CAGR) from 2024 to 2029.
- TSM has a forward earnings multiple of around 26x, versus the S&P 500’s 22x.
The four major AI hyperscalers — Amazon, Microsoft, Alphabet, and Meta Platforms — are on course to spend roughly $650 billion on data center capital expenditures in 2026, and TSMC is well-positioned to capture a significant portion of that spending.
Here’s the reason: nearly every advanced chip used in these data centers is manufactured by TSMC.
Whether a hyperscaler is purchasing Nvidia GPUs or a custom chip from Broadcom, there’s a high chance it was produced at a TSMC facility. This makes TSM one of the rare true “picks and shovels” investments in AI — it benefits regardless of which company develops the top model or sells the most hardware.
Entering the chip foundry industry is challenging. Intel attempted to do so, but its foundry division has faced significant struggles. Samsung has the necessary capabilities but lacks the required scale, leaving TSMC as the dominant player at the cutting edge of chip manufacturing.
DA Davidson Launches Coverage with Buy Rating
On February 12, 2026, DA Davidson launched coverage of TSM, assigning it a Buy rating and a $450 price target — approximately 21% higher than the stock’s trading price of $370.54 on February 20.
The firm highlighted TSMC’s capability to translate new chip architectures into high-yield, large-volume production as the foundation of its competitive advantage.
DA Davidson noted that while competitors may match specific specifications on paper, TSMC’s true advantage lies in its ability to execute at scale. This is a competitive barrier that takes years to develop and is difficult to replicate.
TSMC’s own management is similarly confident. The company projects AI chip revenue will grow at a nearly 60% compound annual growth rate between 2024 and 2029.
This level of sustained growth over five years underscores the potential longevity of the AI infrastructure expansion.
Valuation Remains Reasonable
Despite its strong momentum, TSM is not valued like an overhyped, fast-growing stock.
The stock trades at around 26 times forward earnings, while the S&P 500 sits at about 22 times. For a company with TSMC’s standing in the AI supply chain, this valuation is not excessive.
TSM’s 52-week price range spans from $134.25 to $380.00, with a market capitalization of $1.9 trillion.
TSM also offers a dividend yield of 0.83% — a modest but tangible benefit for a growth-focused company.
The company’s gross margin stands at 59.02%, reflecting the pricing power that comes with being the dominant player at the leading edge of chip manufacturing.
TSMC is also constructing manufacturing facilities in the U.S., which strengthens its long-term position and mitigates geopolitical risk concerns that have occasionally pressured the stock.
Billionaire investor Stanley Druckenmiller includes TSM in his top 10 stock selections, according to recent portfolio disclosures.
DA Davidson’s $450 price target, issued on February 12, 2026, remains the latest analyst recommendation for the stock.
