Analysis of Reddit "Very Bullish on TSMC" Discussion: Valuation, Risks, and Long-Term Prospects

This analysis is based on a December 2, 2025 Reddit discussion debating TSMC’s valuation and outlook, combined with market data from internal sources [0] and external reports [1]. The original Reddit poster argued TSMC is undervalued relative to AI peers (NVDA/AMD) with a 28-30x P/E ratio, ~1 PEG ratio, and 50% operating margins, emphasizing its underappreciated role in global AI chip fabrication. Counterpoints included a short-term geopolitical risk discount, margin headwinds from Arizona/Japan fab expansion (compounded by foreign exchange fluctuations), potential Intel 18AP competition for Apple in 2027, and a dispute over the accuracy of the OP’s PEG ratio claim.

Market data confirms TSMC’s current P/E (30.30 real-time / 25.40 trailing) aligns with the OP’s estimate, and its operating margin (48.75% trailing) is near the claimed 50% [0]. Q3 2025 revenue reached $33.1 billion (+10.1% sequentially), with 74% from advanced technologies (7nm and below) driven by strong AI demand [0]. The company’s 2-nanometer (N2) node is on track for Q4 2025 volume production, with a faster 2026 ramp-up for AI and HPC applications [0]. Analyst consensus remains “Buy” with a $360.00 price target (+23.2% from current) [0].

Regarding competition, Intel’s potential 2027 deal to supply Apple with 15-20 million entry-level M-series chips will not displace TSMC as the primary supplier (which retains 80% production share for high-performance cores), limiting the impact on TSMC’s business [1].

1. TSMC’s underappreciated AI role is data-supported
   : While public attention often focuses on AI chip designers like NVDA and AMD, TSMC’s 74% advanced technology revenue and leadership in node development (N2) position it as a critical enabler of AI growth [0].
2. Overseas expansion balances geopolitical risk with short-term costs
   : TSMC’s Arizona/Japan fab expansion mitigates Taiwan concentration risks but causes 1-2% 2025 gross margin dilution [0].
3. Intel competition is low-volume and unlikely to disrupt market share
   : The Apple-Intel deal involves only entry-level chips (20% of Apple’s production), leaving TSMC dominant in high-margin, high-performance AI-related fabrication [1].

• Short-term margin dilution
  : Overseas fab ramp-up and unfavorable foreign exchange rates may reduce 2025 margins by 1-2% [0].
• Geopolitical uncertainty
  : Concentration of leading-edge production (N2 node) in Taiwan remains a long-term risk [0].
• Competitive credibility gain
  : Intel’s foundry business could attract smaller customers if it delivers on the Apple deal [1].

• Exponential AI demand
  : AI token volume growth is driving accelerated demand for TSMC’s advanced nodes (N2, N2P) [0].
• Global expansion benefits
  : Long-term, TSMC’s diversified fab footprint will enhance supply chain resilience [0].
• Valuation upside
  : The current analyst target (+23.2%) indicates potential long-term value appreciation [0].

• TSMC’s valuation metrics (P/E ~30, margins ~48.75%) broadly align with the Reddit OP’s claims [0].
• Long-term bullish drivers (AI demand, leading-edge technology) are significant but tempered by short-term headwinds (margin dilution, geopolitical risk).
• Intel’s potential Apple deal poses limited risk, with TSMC retaining its dominant position in high-performance chip fabrication [1].