Is Taiwan Semiconductor Stock a Buy Before July?
Key Points
Taiwan Semiconductor's stock has risen over 45% year to date on record revenue.
The company controls more than 70% of the global semiconductor foundry market.
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Taiwan Semiconductor Manufacturing (NYSE: TSM) is due to report its second-quarter 2026 earnings in mid-July and its monthly revenue figures next week. With shares trading near the 52-week high, should investors consider buying now?
A stock worth buying and holding
The case for buying the stock is more than compelling. TSMC's first-quarter earnings were terrific. Revenue climbed over 35% year over year to $35.9 billion. The company's gross margin expanded to an impressive 66.2%, a sign of healthy pricing power for the chipmaker.
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The company anticipates full-year revenue growth of more than 30%. TSMC's market cap passed $2 trillion on June 4, yet its forward P/E ratio is still around 27, and the price-to-sales ratio is slightly above 17. I do not believe the stock is overvalued based on the company's outlook.
As for monthly revenue, TSMC's revenue hit an all-time high in March but then slowed in April. When the May sales numbers are released, a further decline could drive the stock down, creating an appealing opportunity for long-term bulls to enter. A slowing of growth isn't necessarily a red flag in this case, as TSMC is a core player in the artificial intelligence (AI) revolution. It currently controls about 70% of the global semiconductor foundry market, which means the company's strong industry position won't be diminished anytime soon.
Image source: The Motley Fool.
The geopolitical risks are real
There are some risks to consider. In particular, any rise in geopolitical tensions could hurt the macroeconomic picture. The company is particularly affected by the relationship between the U.S. and China. TSMC is also vulnerable in that it has a highly concentrated customer base. Nvidia and Apple comprise approximately 40% of TSMC's revenue.
The long-term outlook for TSMC is promising, and if you're an investor with patience, there's still a long way this stock could run. The 28% increase in the 2026 dividend doesn't hurt either.
Should you buy stock in Taiwan Semiconductor Manufacturing right now?
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Catie Hogan has positions in Apple. The Motley Fool has positions in and recommends Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
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