Taiwan Semiconductor Manufacturing Company is about to take center stage. On January 15, the world's most important chipmaker will report fourth-quarter earnings—and Wall Street is expecting fireworks. Goldman Sachs has raised its price target by a stunning 35%, declaring that artificial intelligence represents a "multi-year growth engine" for the semiconductor giant.

The numbers behind the optimism are extraordinary. Goldman analyst Bruce Lu now expects TSMC's revenue to grow 30% in 2026 and 28% in 2027, up sharply from previous forecasts of 22% in both years. Earnings per share could reach NT$100 (approximately $3.20) by 2027—nearly double the company's 2024 results.

The AI Demand Surge

At the heart of Goldman's bullish thesis is an insatiable demand for AI chips. TSMC manufactures the most advanced semiconductors for virtually every major AI player, including Nvidia, AMD, Apple, and a growing roster of hyperscalers designing custom silicon.

The capacity constraints are real and persistent. Goldman projects "continued tightness" in TSMC's 3-nanometer and 5-nanometer production lines throughout 2026 and 2027. These are the cutting-edge processes that produce chips for AI accelerators, smartphones, and high-performance computing.

"We view AI as a multi-year growth engine for TSMC. The company's profit margins are improving even as it spends $150 billion over three years to increase capacity. This is the sweet spot for semiconductor investors."

— Bruce Lu, Goldman Sachs Analyst

The January 15 Catalyst

When TSMC reports after the bell on Wednesday, investors will parse every detail for signals about 2026. The key metrics to watch:

  • Q4 revenue: TSMC has already guided for fourth-quarter revenue of approximately $26.1 billion to $26.9 billion. Any beat would signal even stronger AI demand
  • Gross margins: Goldman expects margins above 60% as TSMC's pricing power expands
  • 2026 guidance: Management's outlook for the coming year will be the most market-moving element of the report
  • Capital spending plans: Analysts expect TSMC to spend approximately $54 billion in 2027 alone, with implications for equipment makers like ASML and Applied Materials

Morgan Stanley Joins the Bull Parade

Goldman isn't alone in its enthusiasm. Morgan Stanley has also raised its TSMC price target, citing robust AI demand, stable foreign exchange conditions, and the company's expanding pricing power.

The Morgan Stanley analysts anticipate TSMC will exceed its fourth-quarter guidance, driven by stronger-than-expected AI chip orders. They project the company's competitive moat will only widen as leading-edge chip manufacturing becomes increasingly complex and capital-intensive.

The Three-Year Investment Cycle

TSMC's planned $150 billion capital expenditure program from 2026 to 2028 represents one of the largest corporate investments in history. The spending will fund:

  • Expansion of 3-nanometer and eventual 2-nanometer production capacity
  • Construction of new fabs in Arizona, Japan, and Germany
  • Research and development for next-generation chip architecture
  • Advanced packaging technologies like CoWoS that are critical for AI chips

For investors, this capex cycle is a double-edged sword. It demonstrates TSMC's confidence in sustained demand—but also represents massive capital commitments that could weigh on returns if AI spending disappoints.

The Competitive Landscape

TSMC's dominance has never been more pronounced. Samsung Foundry and Intel's foundry business continue to lag in manufacturing capability, leaving TSMC as the only viable producer for cutting-edge AI chips.

This monopoly position carries both opportunity and risk. On the opportunity side, TSMC can command premium pricing for its most advanced processes. Nvidia pays significantly more per wafer than it did just two years ago, and still can't get enough capacity.

The risks are geopolitical. TSMC's concentration in Taiwan—an island that China claims as its territory—creates supply chain vulnerabilities that have only intensified since Russia's invasion of Ukraine. The company's expansion to Arizona addresses some of these concerns, but the vast majority of production will remain in Taiwan for the foreseeable future.

What the Earnings Mean for the AI Trade

TSMC's report will have ripple effects across the technology sector. A strong result and bullish guidance would validate the AI infrastructure buildout that has driven tech stocks higher for two years.

The Beneficiaries

Several stocks move in sympathy with TSMC results:

  • Nvidia (NVDA): TSMC manufactures all of Nvidia's AI accelerators. Strong TSMC demand signals strong Nvidia demand
  • ASML (ASML): The Dutch company is the sole supplier of extreme ultraviolet lithography machines essential for advanced chip production
  • Applied Materials (AMAT): Supplies the equipment TSMC uses to fabricate chips
  • AMD (AMD): A major TSMC customer competing with Nvidia in AI accelerators

The Skeptics' View

Not everyone shares Goldman's enthusiasm. Bears argue that the market has already priced in AI's transformational potential, leaving little room for upside surprises. They point to:

  • TSMC's stock having already risen substantially from its 2024 lows
  • Questions about how long hyperscaler capital spending can continue at current rates
  • Potential for AI demand to be pulled forward, creating a trough in future years
  • Rising competition from Intel's foundry ambitions and Samsung's manufacturing improvements

The Broader Market Context

TSMC's earnings arrive at a pivotal moment for technology stocks. The Nasdaq has rallied sharply to start 2026, with AI-related names leading the charge. But valuation concerns persist, and any disappointment from the sector's cornerstone company could trigger a broader pullback.

The semiconductor industry's trajectory will also influence Federal Reserve policy discussions. Strong chip demand suggests robust business investment—a factor the Fed weighs when assessing economic conditions. Conversely, any sign of AI spending fatigue could reinforce expectations for rate cuts.

How to Play the Report

For investors considering TSMC ahead of earnings, the decision framework involves balancing several factors:

The bull case: AI demand is structural, not cyclical. TSMC's monopoly position allows it to capture an outsized share of the industry's growth. Goldman's 35% target increase suggests significant upside remains.

The bear case: Expectations are sky-high. Options markets are pricing in significant moves around the earnings report. Any guidance that falls short of aggressive analyst estimates could trigger a sell-off.

The hedge: For those bullish on AI but concerned about single-stock risk, broad exposure through semiconductor ETFs like SMH offers diversified participation in the theme.

The Bottom Line

TSMC's January 15 earnings represent the first major test of the AI investment thesis in 2026. Goldman's 35% price target increase reflects conviction that the semiconductor upcycle has years to run—but the market will demand proof.

For the technology sector and potentially the broader market, Wednesday's report will set the tone. The world's most important chipmaker is about to show its cards, and investors around the globe will be watching.

Whether you're bullish or cautious on AI, TSMC's earnings are must-see financial television. The company that makes the chips that make AI possible is about to tell us how real the revolution truly is.