Buying TSMC Stock Before July 16 Just Became a No-Brainer Due to This Massive News

Taiwan Semiconductor Manufacturing (NYSE: TSM) is right in the middle of the artificial intelligence (AI)-fueled semiconductor boom, primarily due to its status as the world's largest foundry that manufactures chips for leading fabless chipmakers and consumer electronic companies.

There is a good chance of TSMC stock getting a nice shot in the arm when it releases its second-quarter results on July 16. The strong demand for TSMC's advanced chipmaking nodes and the company's solid pricing power indicate that it could crush Wall Street's expectations. And now, the latest monthly revenue update from TSMC makes it clear that this semiconductor bellwether is on track to deliver more upside following 32% gains in 2026.

Let's see why that may be the case.

Image source: TSMC.

TSMC's Q2 performance indicates that AI chip demand is getting stronger

TSMC's June revenue jumped by an impressive 68% year over year. This is the fastest monthly revenue growth the company has reported in 2026, well above the 45% year-over-year jump in its March revenue. What's worth noting is that the foundry specialist's monthly revenue increased by 6.2% from May. That's a big deal, as TSMC's June revenue has declined sequentially from May in each of the past four years, as noted by research and analysis provider SemiAnalysis (via CNBC).

This solid growth has helped TSMC exceed the high end of its Q2 revenue guidance of $40.2 billion, according to SemiAnalysis. That would translate into a year-over-year increase of almost 34%. Additionally, TSMC's leading-edge 3-nanometer (nm) process node is sold out, driven by incredible demand from key customers such as Nvidia, Apple, AMD, and others.

Not surprisingly, TSMC is reported to have increased the prices of its advanced nodes by 5% to 10%, according to Tom's Hardware. The 3nm node produces a quarter of TSMC's revenue, and the reported price hike should boost the company's margins. TSMC's operating margin was 49.6% in the second quarter of 2025. It guided to a 57.5% operating margin for the second quarter, but the actual number could be much higher when it reports on July 16.

As a result, TSMC's earnings-per-share growth could exceed the 55% year-over-year increase that analysts are anticipating in Q2. Also, its guidance could be stronger than expected, primarily due to the production ramp of the 2nm N2 production node. TSMC started volume production of the N2 node in Q4 2025 and is looking to add capacity to support solid demand for this node.

TSMC has reportedly priced this process node at a 10% to 20% premium over the 3nm node, indicating that further margin improvements could be in the cards. This explains why analysts are expecting stronger long-term earnings growth from TSMC.

Data by YCharts

Buy the stock while it trades at a reasonable valuation

TSMC trades at 28 times forward earnings, only a slight premium to the tech-focused Nasdaq-100 index's forward earnings multiple of 25.6. It could trade at a bigger premium if its earnings per share and guidance indeed crush consensus estimates this week.

Moreover, TSMC's earnings could exceed the 50% jump that analysts are forecasting in 2026, driven by price hikes and the addition of the higher-priced N2 node. So, it makes sense to buy this stock ahead of its Q2 report, as it is highly likely that its impressive rally is about to get a nice shot in the arm.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.