• Wondering whether Taiwan Semiconductor Manufacturing stock still offers value after its strong run, or if you might be arriving late to the story?
• The share price last closed at US$414.15, with returns of 4.6% over 7 days, 19.9% over 30 days, 29.6% year to date, 138.6% over 1 year, 413.9% over 3 years and 306.3% over 5 years.
• Recent headlines have focused on Taiwan Semiconductor Manufacturing's central role in global chip supply and its position in advanced manufacturing capacity. This context helps explain why the stock has been in focus for investors watching both semiconductor demand and potential supply chain shifts.
• On Simply Wall St's 6 point valuation framework, Taiwan Semiconductor Manufacturing scores 3 out of 6. The next sections will break down what different valuation methods suggest about the current price and then finish with a way to think about value that goes beyond just the numbers.

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

A Discounted Cash Flow, or DCF, model estimates what a stock might be worth by projecting 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. The latest twelve month free cash flow is about NT$941.7b. Analyst inputs and extrapolations point to free cash flow of around NT$1,440.1b in 2026, rising to roughly NT$4,001.0b by 2035. Projections beyond the first five years are extrapolated rather than directly provided by analysts.

Aggregating these projected cash flows and discounting them back gives an estimated intrinsic value of US$219.85 per share. Compared with the recent share price of US$414.15, the model implies that the stock is about 88.4% above this DCF estimate, which indicates a rich valuation on this metric alone.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Taiwan Semiconductor Manufacturing may be overvalued by 88.4%. Discover 51 high quality undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Taiwan Semiconductor Manufacturing Price vs Earnings

For a profitable company, the P/E ratio is a useful way to relate what you pay for each share to the earnings that support that price. It gives you a quick sense of how many years of current earnings the market is effectively pricing in.

What counts as a “normal” P/E usually reflects how fast earnings are expected to grow and how risky those earnings are perceived to be. Higher growth and lower perceived risk tend to justify higher P/E multiples, while slower growth or higher uncertainty usually point to lower multiples.

Taiwan Semiconductor Manufacturing currently trades on a P/E of 31.39x. This sits below the Semiconductor industry average P/E of 59.42x and below the peer average of 71.57x. Simply Wall St’s Fair Ratio for the stock is 48.34x, which is a proprietary estimate of the P/E that might be reasonable given factors like earnings growth, profit margins, industry, market cap and risk profile.

The Fair Ratio is more tailored than simple peer or industry comparisons because it adjusts for company specific drivers rather than assuming all stocks deserve the same multiple. With the current P/E of 31.39x below the Fair Ratio of 48.34x, the stock screens as undervalued on this metric.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Taiwan Semiconductor Manufacturing Narrative

Earlier it was mentioned that there is an even better way to understand valuation. This is where Narratives come in as a simple way for you to attach a clear story to the numbers you are seeing, by linking your view of Taiwan Semiconductor Manufacturing’s future revenue, earnings and margins to a forecast and then to a fair value that can be compared to the current price.

On Simply Wall St’s Community page, Narratives let you pick or create a story. For example, one investor might focus on AI accelerators, CoWoS packaging and N2 rollout and arrive at a fair value near US$450, while another might put more weight on geopolitical risk or margin pressure and arrive closer to US$55. Both are using the same stock and the same current price but different assumptions about Taiwan Semiconductor Manufacturing’s future.

Once you choose a Narrative, the platform lines up that fair value against the live share price to help you consider whether the stock appears expensive or inexpensive for your chosen story. Because Narratives are updated when new results, guidance or news are added, you can see quickly whether your story still holds or whether it might be time to rethink your assumptions.

For Taiwan Semiconductor Manufacturing, here are previews of two leading Taiwan Semiconductor Manufacturing narratives to make comparison easier:

Fair value: US$629.70 per share

Implied discount to this narrative: about 34.2% vs the recent US$414.15 share price

Revenue growth assumption: 26%

• Expects demand for advanced chips to stay supported by AI, IoT, 5G and automotive electronics, with Taiwan Semiconductor Manufacturing positioned as a key supplier across these areas.
• Assumes healthy profit margins backed by ongoing R&D investment, scale benefits from advanced nodes like 3nm and below, and a broadening set of end markets such as medical devices and smart infrastructure.
• Flags risks such as the durability of AI chip demand, geopolitical uncertainty around Taiwan, and reliance on large customers like Apple, but still arrives at a higher long term fair value than today’s price.

Fair value: US$381.00 per share

Implied premium to this narrative: about 8.7% vs the recent US$414.15 share price

Revenue growth assumption: 70.28%

• Highlights how central Taiwan Semiconductor Manufacturing is to leading edge chip production, with high margins and strong cash generation supported by heavy capital investment in advanced nodes and packaging.
• Stresses that concentrated manufacturing in Taiwan exposes investors to low probability but severe geopolitical risk, where a major disruption could have wide ranging effects on global chip supply.
• Argues that, given this risk profile and the current share price premium to its fair value estimate, investors may want a larger margin of safety before being comfortable with the stock.

Once you have a sense of which of these stories feels closer to your own view, you can read the full narratives, adjust the assumptions and see how that shifts the fair value relative to today’s price: See what the community is saying about Taiwan Semiconductor Manufacturing.

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

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.