DA Davidson launched coverage of Taiwan Semiconductor Manufacturing Company (NYSE: TSM) on Thursday with a Buy recommendation and a $450.00 price target. The research note underscores TSMC's manufacturing capabilities as the principal competitive advantage as demand for artificial intelligence compute grows.
The firm pointed to TSMC's scale and repeated success in translating architectural shifts into high-volume production platforms, describing this as a "compounding execution moat" that yields a "durable, self-reinforcing advantage." DA Davidson noted that customers ultimately prioritize delivered cost per good die on schedule, and that TSMC's operational playbook aligns with that commercial metric.
On valuation and performance metrics, DA Davidson noted that TSMC carries a market valuation of $1.58 trillion and trades at a price-to-earnings ratio of 28.38. The company also shows a favorable price/earnings-to-growth (PEG) ratio of 0.59, which the firm interprets as a comparatively low P/E relative to near-term earnings growth expectations. Over the past 12 months, TSMC's stock returned 83.17%, a performance DA Davidson attributes in part to the firm's manufacturing leadership.
Financial strength and profitability were also emphasized. TSMC reported consolidated revenue of NT$3,809.05 billion for 2025 and net income of NT$1,717.88 billion. The company declared a cash dividend of NT$6.0 per share for the fourth quarter of 2025, with the dividend payment scheduled for July 9, 2026. Gross profit margins stood at 59.89%, and InvestingPro's assessment of the company’s overall financial health was characterized as "GREAT."
DA Davidson highlighted recent technology developments that underpin its positive view. The firm flagged the N2 node as entering volume production as TSMC's first nanosheet GAA (gate-all-around) node, and the A16 node is targeted for the second half of this year with backside power delivery. While rival manufacturers may be able to replicate discrete technical features on paper, DA Davidson argued that TSMC's advantage is its ability to industrialize new device and power architectures into high-yield, high-throughput manufacturing with validated enablement and predictable ramp timing.
TSMC also disclosed a strong start to 2026, reporting net revenue of NT$401.26 billion for January 2026, representing a 36.8% increase year-over-year. Looking ahead, the company set capital expenditure guidance for 2026 at $52-56 billion, an increase of 32% from the previous year.
Market and analyst reactions to TSMC's results and guidance have been varied but largely constructive. TD Cowen raised its price target for TSMC to $370.00 while keeping a Hold rating. Bernstein reiterated an Outperform rating with a $330.00 target and cited robust quarterly results and higher revenue growth expectations. Bernstein's view of stronger demand and elevated capex also influenced its stance on suppliers, leading it to maintain an Outperform rating on ASML Holding NV, a key equipment provider for advanced nodes.
DA Davidson's initiation with a Buy rating and a $450 price target, coupled with TSMC's reported 2025 results and elevated capex plan for 2026, frames a narrative in which manufacturing execution and node roadmap progress are central to the company's near-term investment thesis. The firm emphasizes that turning architectural advances into reproducible, high-volume production remains the critical differentiator in advanced semiconductor manufacturing.
Key points
- DA Davidson initiated TSMC coverage with a Buy rating and a $450.00 price target, citing a manufacturing "execution moat" as the core advantage.
- TSMC reported NT$3,809.05 billion in consolidated revenue and NT$1,717.88 billion in net income for 2025, declared a NT$6.0 per share Q4 2025 dividend payable July 9, 2026, and posted January 2026 net revenue of NT$401.26 billion, up 36.8% year-over-year.
- Technology progress includes N2 in volume production as TSMC's first nanosheet GAA node and A16 planned for the second half of this year with backside power delivery; 2026 capex guidance is $52-56 billion, a 32% increase year-over-year.
Risks and uncertainties
- Competitive parity on technical specifications - DA Davidson cautioned that competitors can match individual features "on paper," creating uncertainty over whether rivals could narrow TSMC's advantage if they successfully translate designs into manufacturing - this affects the semiconductor manufacturing and capital equipment sectors.
- Execution of node ramps and yields - the investment thesis depends on TSMC's ability to convert new device and power architectures into high-yield, high-throughput manufacturing with validated enablement and predictable ramps; delays or yield shortfalls would impact demand and supplier dynamics in the semiconductor ecosystem.
- Capital expenditure and supplier exposure - TSMC's substantial 2026 capex guidance of $52-56 billion elevates exposure for equipment suppliers such as ASML, and fluctuations in capex execution could influence supplier valuations and the broader semiconductor capital goods market.
Note: This article presents analyst ratings, company-reported financials and disclosed capital plans as provided in the coverage and company statements.