Should You Buy Taiwan Semiconductor Manufacturing Stock Before Oct. 15? History Is Crystal Clear on Where the Stock Is Headed Next.

The artificial intelligence (AI) boom has created plenty of winners, but few companies occupy a position quite like Taiwan Semiconductor Manufacturing (NYSE: TSM). Taiwan Semi doesn't design the GPUs powering large language models (LLMs). Instead, it manufactures the advanced chips designed by companies such as Nvidia, Advanced Micro Devices, Apple, and many others.

This role makes TSMC something like a factory supporting the AI infrastructure revolution. On Oct. 8, Taiwan Semi reported revenue figures for September, underscoring to investors just how valuable the company's position is.

With September's results now published, investors have a clearer picture of what to expect when Taiwan Semi reports third-quarter earnings on Oct. 15. The numbers suggest another monster quarter could be coming.

Image source: Taiwan Semiconductor Manufacturing.

TSMC is the manufacturing backbone of AI

Taiwan Semi's biggest competitive advantage is simple: Manufacturing cutting-edge semiconductors is incredibly difficult. The company spent decades refining its manufacturing processes while investing enormous sums of money into sophisticated fabrication facilities.

The company's lead is enormous. At the end of the second quarter, TSMC controlled approximately 72.5% of the global semiconductor foundry market, according to TrendForce. Samsung ranked a distant second with just 5.9%.

Demand for Nvidia GPUs, AMD accelerators, memory solutions from Micron Technology, and custom chips designed by hyperscalers such as Amazon, Alphabet, Meta Platforms, and Microsoft is keeping Taiwan Semi's manufacturing capacity busy.

TSMC's latest financial results prove just how strong AI-driven demand is becoming. The company generated approximately $14.6 billion in July revenue, followed by $16.1 billion in August and $16 billion in September. That's nearly $1 billion above the high end of management's guidance and roughly $1.4 billion ahead of analyst expectations.

In total, third-quarter revenue should land around $46.7 billion, up from $33.1 billion during the same period last year. That's roughly 41% growth when measured in U.S. dollars. Of note, revenue acceleration does not guarantee a beat on earnings. Profitability depends on manufacturing costs, product mix, and operating expenses.

What catalysts does TSMC have?

The first catalyst I see for Taiwan Semi simply revolves around the unprecedented amount of money being poured into AI infrastructure. Goldman Sachs estimates the largest U.S. hyperscalers will spend approximately $800 billion on capital expenditures (capex) in 2026, potentially rising to $1.2 trillion in 2027 and $1.4 trillion in 2028. Meanwhile, McKinsey estimates $5.2 trillion of cumulative investment will be required globally for AI data centers through 2030.

Of course, not all of that spending will go toward semiconductors. Data centers also require power systems, cooling equipment, networking, and real estate. But the processors powering those facilities increasingly depend on TSMC's manufacturing technologies. That's an enormous secular tailwind for the foundry business.

The second catalyst involves Elon Musk. Musk recently confirmed discussions between Taiwan Semi and Terafab, the semiconductor manufacturing initiative being developed by Tesla and Space Exploration Technologies. He clarified that Tesla and SpaceX are going to own and operate the facility, but TSMC could potentially sublease part of it. Although nothing is finalized, the discussions demonstrate how valuable Taiwan Semi's manufacturing expertise has become to the AI chip value chain.

Should you buy Taiwan Semi stock before earnings?

The chart below illustrates Taiwan Semi's stock price throughout the AI revolution. Earnings dates are annotated by the purple circles with the letter "E" in the center.

TSM data by YCharts

Notice how the stock hasn't always celebrated around the time of an earnings report. Does this mean TSMC will fall after Oct. 15? Not necessarily.

Sometimes momentum investors buy stocks ahead of earnings, pushing expectations so high that even an excellent quarter fails to generate a rally. Other times, stronger-than-expected guidance sends shares higher. The patterns in the chart above do not establish a reliable trajectory of pre-earnings rallies followed by sell-offs. It simply illustrates how unpredictable short-term reactions can be.

If you zoom out, the picture changes drastically. Despite occasional post-earnings declines, Taiwan Semi stock has appreciated substantially over the past several years as demand for advanced semiconductors accelerated. That's the distinction investors should remember.

The company's long-term outlook is supported by enormous AI infrastructure investments and growing demand for advanced manufacturing. Rather than trying to predict a specific reaction around one earnings event, long-term investors are better served accumulating TSMC shares over a multiyear horizon.

To me, Taiwan Semi is one of the most compelling semiconductor stocks of the AI infrastructure era. History suggests meaningful gains could be in store for investors willing to buy and hold over the next several years.

Adam Spatacco has positions in Alphabet, Amazon, Microsoft, Nvidia, and Tesla. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Goldman Sachs Group, Meta Platforms, Micron Technology, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool has a disclosure policy.