TSMC (TSM) Surges Nearly 3% as Musk Confirms Terafab Partnership Discussions

TLDR

• TSMC shares surged nearly 3% to record highs Monday following Elon Musk’s confirmation of preliminary discussions regarding his Terafab chip manufacturing initiative.
• The semiconductor giant is evaluating a major Texas manufacturing campus expansion that could involve multiple fabrication facilities, each requiring investments exceeding $20 billion.
• Intel shares declined over 2% following the announcement, despite being an existing Terafab collaborator.
• Year-to-date gains for TSMC have reached approximately 60%, fueled by explosive AI chip market growth.
• October 15 earnings are anticipated, with analysts projecting EPS of $4.45 versus $2.92 in the prior-year period.

Taiwan Semiconductor Manufacturing Company (TSM) shares soared to unprecedented levels during Monday’s session. The stock advanced as much as 2.75%, continuing a remarkable run that has positioned TSMC among 2025’s top-performing semiconductor equities.

Taiwan Semiconductor Manufacturing Company Limited, TSM

The rally followed Elon Musk’s public acknowledgment of preliminary negotiations with TSMC concerning potential involvement in his ambitious Terafab initiative. This project envisions constructing an enormous semiconductor manufacturing facility in Texas designed to serve the chip requirements of Tesla, SpaceX, and xAI.

Technology journalist Tim Culpan disclosed that TSMC is examining potential frameworks for supporting the emerging chipmaker’s planned Texas operations.

Musk addressed the speculation directly via X, stating “Just discussions, but something may come of it.”

Meanwhile, Intel—which announced its Terafab partnership in April—experienced a contrasting market reaction. The stock tumbled more than 2% as market participants assessed the implications of TSMC’s potential entry for Intel’s foundry business strategy.

Separate reporting from Bloomberg on Thursday revealed that TSMC is evaluating an entirely distinct manufacturing complex in Texas. This undertaking could necessitate capital expenditures in the tens of billions and encompass several fabrication facilities, although negotiations remain in preliminary stages.

Industry observers note that individual fabrication plants typically require minimum investments of $20 billion. Any commitment will likely depend on whether the 35% federal advanced-manufacturing tax credit receives Congressional extension beyond its current 2026 expiration date.

Accelerating Customer Demand

North American clients currently account for more than three-quarters of TSMC’s wafer sales revenue. Major technology companies including Nvidia and AMD are placing substantial orders for cutting-edge chip production capacity.

Deputy Co-Chief Operating Officer Cliff Hou revealed that TSMC has approximately doubled its equipment acquisition budget over the preceding twelve months. This aggressive investment reflects efforts to match the explosive expansion in AI infrastructure requirements.

TSMC has already allocated $265 billion toward its Arizona manufacturing footprint. Additionally, the company is advancing initiatives in Japan and Germany while conducting exploratory discussions with Singapore officials.

Industry analyst firm Counterpoint Research identifies TSMC as the “central beneficiary” of artificial intelligence chip market expansion. The research house highlighted second-quarter year-over-year revenue acceleration of 34%, with total sales reaching $40.2 billion.

TSMC’s Foundry 2.0 market share expanded to approximately 42%, compared with 38% during 2025. Counterpoint projects full-year 2026 revenue growth around 43%, with momentum accelerating toward 50% during the latter half of the year.

Potential Headwinds on the Horizon

S&P Global Ratings forecasts hyperscaler AI capital expenditures will reach $1.5 trillion by 2028. The rating agency believes TSMC possesses considerable resilience even should that investment cycle eventually moderate.

S&P highlighted TSMC’s technological leadership position and broad customer portfolio as key factors supporting pricing power and profit margins. The firm anticipates profitability and cash flow generation will remain above 2026 benchmarks even under softer demand scenarios.

Notwithstanding aggressive international expansion, TSMC maintains that its most sophisticated manufacturing processes will remain anchored in Taiwan. Company representatives declined to address the Texas campus speculation directly, stating only, “We have no comment on market rumors.”

TSMC’s October 15 quarterly results will draw significant attention from investors. Consensus estimates call for earnings per share of $4.45, representing substantial growth from $2.92 in the year-ago quarter, while revenue is forecast at $45.54 billion compared with $33.10 billion previously.

Current valuation metrics show the stock trading at a price-to-earnings multiple of approximately 35.3. TSM holds a Buy consensus among Wall Street analysts with an average target price of $547.38, and major investment banks including Stifel, Bernstein, and Needham have recently issued Buy or Outperform recommendations.

During Monday’s premarket session, shares advanced 1.66% to $480.62, establishing yet another 52-week high watermark.