Is Taiwan Semiconductor Manufacturing (NYSE:TSM) Pricing Reflect Its Central Role In Global Chip Supply

If you are trying to work out whether Taiwan Semiconductor Manufacturing is reasonably priced or not, the recent share performance and current valuation checks give you quite a bit to think about. The stock last closed at US$327.37, with returns of 10.2% over 30 days, a 4.2% decline over 7 days, 2.4% year to date, 47.3% over 1 year, 263.4% over 3 years and 177.8% over 5 years. Recent news coverage has focused on Taiwan Semiconductor Manufacturing’s central role in global chip supply and its position as a key producer for a wide range of technology products. This context is often used by investors to interpret the stock’s strong multi year returns and shorter term pullbacks. On Simply Wall St’s 6 point valuation checklist, Taiwan Semiconductor Manufacturing currently scores 3 out of 6. Next, we will look at how different valuation methods assess the stock and then finish with a more complete way to think about its value.

Taiwan Semiconductor Manufacturing delivered 47.3% returns over the last year. See how this stacks up to the rest of the Semiconductor industry.

Approach 1: Taiwan Semiconductor Manufacturing Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company might be worth by projecting its future cash flows and discounting them back to today to reflect risk and the time value of money.

For Taiwan Semiconductor Manufacturing, the model uses a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month free cash flow is NT$900,193.91m. Analysts provide explicit forecasts for several years, and beyond that Simply Wall St extrapolates free cash flow further out. For example, the 2029 free cash flow projection is NT$2,486,278.65m, with a full set of annual forecasts up to 2035 used in the model.

Bringing all of those projected cash flows back to today results in an estimated intrinsic value of US$210.24 per share. Compared with the recent share price of US$327.37, the DCF output suggests the stock is around 55.7% above this intrinsic value estimate, which points to a rich valuation on this model.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Taiwan Semiconductor Manufacturing may be overvalued by 55.7%. Discover 879 undervalued stocks or create your own screener to find better value opportunities.

TSM Discounted Cash Flow as at Jan 2026

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Taiwan Semiconductor Manufacturing.

Approach 2: Taiwan Semiconductor Manufacturing Price vs Earnings

P/E is a common way to value profitable companies because it links what you pay directly to the earnings the business is already generating. A higher or lower P/E often reflects what the market expects for future growth and how much risk investors see in those earnings, so there is no single “right” number in isolation.

Taiwan Semiconductor Manufacturing currently trades on a P/E of 26.57x. This sits below the Semiconductor industry average of 43.71x and also below the peer group average of 70.37x. On the surface, that might suggest a lower valuation compared with many listed chip companies.

Simply Wall St also calculates a proprietary “Fair Ratio” for Taiwan Semiconductor Manufacturing of 38.73x. This aims to estimate an appropriate P/E for the company by considering factors such as its earnings growth, industry, profit margins, market cap and risk profile. Because it is tailored to the company, this Fair Ratio can be more informative than a simple comparison with broad industry or peer averages. With the current P/E of 26.57x sitting below the Fair Ratio of 38.73x, this approach points to the shares looking undervalued on an earnings basis.

Result: UNDERVALUED

NYSE:TSM P/E Ratio as at Jan 2026

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1428 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Taiwan Semiconductor Manufacturing Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simply your story about a company linked directly to the numbers you think are reasonable for its fair value, future revenue, earnings and margins.

A Narrative connects three things: the company story you believe, the financial forecast that story implies, and the fair value that results from those forecasts. On Simply Wall St you can explore and create these on the Community page that millions of investors already use.

Because each Narrative compares its own Fair Value to the current share price and then updates automatically when fresh information such as news or earnings is added, it can help you decide whether Taiwan Semiconductor Manufacturing still fits your view or whether the gap between price and value has become too wide for your comfort.

For example, one Taiwan Semiconductor Manufacturing Narrative might assume a very optimistic long term outlook and arrive at a much higher fair value than another Narrative that uses more cautious forecasts and therefore lands on a far lower fair value, giving you a clear sense of how different perspectives translate into different numbers.

Do you think there’s more to the story for Taiwan Semiconductor Manufacturing? Head over to our Community to see what others are saying!

NYSE:TSM 1-Year Stock Price Chart

This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

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