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Taiwan Semiconductor Manufacturing (TSM), the world’s leading semiconductor foundry, has seen its stock price rise approximately 35% so far in 2026. While respectable, this gain still lags behind the 61% surge in the PHLX Semiconductor Sector index over the same period. Behind this performance gap lies a complex market debate over AI supply chain valuations and the pace of earnings delivery. Nvidia‘s earnings report, due after the market closes on August 26, could become the key catalyst to change this dynamic.
Nvidia: TSMC’s “Top Customer”
Nvidia’s importance to TSMC can no longer be overlooked. Data shows that in 2025, Nvidia contributed approximately $23.16 billion in revenue to TSMC, accounting for 19% of the foundry’s total revenue—surpassing Apple (17%) to become its largest customer. Market consensus expects Nvidia’s quarterly revenue to reach between $92 billion and $95 billion, representing nearly a doubling year-over-year. If Nvidia delivers a beat, TSMC—as its core manufacturing partner—stands to benefit directly.
Two Core Drivers Are Gaining Momentum
First, product price increases. According to Bloomberg, Nvidia plans to raise prices on its next-generation Vera Rubin AI chip systems by more than 15%. The pricing power stems from robust demand—Nvidia CEO Jensen Huang has previously disclosed that the order book for Blackwell and Vera Rubin chips amounts to a staggering $1 trillion. More importantly, this creates room for TSMC to increase its own foundry service prices. Nikkei Asia previously reported that TSMC may raise foundry prices by 10% in 2027.
Second, ramp-up of new process platforms. TSMC’s second-quarter earnings showed that its 2nm process has begun contributing revenue, accounting for 3% of total sales. Goldman Sachs estimates that Vera Rubin-related chips could account for more than 40% of Nvidia’s GPU revenue in the fourth quarter of 2026. The rapid ramp-up of advanced nodes will directly boost TSMC’s wafer revenue and gross margins.
Market Expectations Have Priced in Some Optimism, but Upside Remains
Analysts project TSMC’s 2026 earnings per share to reach $16.90, up approximately 59% year-over-year. BOCOM International recently raised its TSMC price target to $500, corresponding to a price-to-earnings ratio of about 27 times. Additionally, the company significantly raised its 2026 capital expenditure guidance to $60-64 billion, and management expects full-year USD revenue growth to be “slightly above 40%,” signaling strong confidence in long-term demand.
As the market awaits Nvidia’s earnings release with bated breath, TSMC—whose current share price remains approximately 14% below its 52-week high—could be poised for a new round of valuation rerating if Nvidia’s results exceed expectations and are accompanied by strong forward guidance.
