Taiwan Semiconductor Manufacturing (NYSE: TSM) is drawing fresh attention from investors seeking alternatives to memory chip stocks amid growing concerns about market oversupply.
AI infrastructure spending shows no signs of cooling, with major hyperscalers sitting on contractual backlogs that dwarf anything seen in previous technology cycles.
Oracle recently reported a contractual backlog of $664 billion, while Alphabet noted its Google Cloud backlog reached $514 billion in the second quarter of 2026.
Dell’Oro Group projects AI infrastructure spending to exceed $3 trillion by 2030, a figure that is nearly double the forecast the firm issued in January this year.
Goldman Sachs expects over $1 trillion in AI investments in 2026 alone, underscoring the enormous capital flows reshaping the semiconductor industry right now.
Micron (NASDAQ: MU) and Sandisk (NASDAQ: SNDK) have benefited significantly from heavy AI data center spending, but investors have been rotating out of both memory stocks lately.
Concerns about potential oversupply in the memory market and already impressive margins have eroded confidence, creating an opening for TSMC to capture investor attention.
TSMC controls 72.5% of the global foundry market according to TrendForce, giving the company substantial pricing power that it is expected to leverage with price increases of up to 10% from 2027.
The company manufactures chips for Nvidia (NASDAQ: NVDA), Advanced Micro Devices (NASDAQ: AMD), Qualcomm (NASDAQ: QCOM), Apple (NASDAQ: AAPL), and Sony (NYSE: SONY), spanning data centers, smartphones, personal computers, and automotive markets.
TSMC noted in April that it expects AI accelerator revenue to grow at a high 50% compound annual growth rate through 2029, but management signalled on the July earnings call that growth could come in faster than previously estimated.
TSMC posted a 53% year-over-year increase in revenue in August, well above the 39% revenue growth the company recorded across the first eight months of 2026.
Nvidia CEO Jensen Huang estimates that AI infrastructure spending could reach a range of $3 trillion to $4 trillion by 2030, far exceeding the $800 billion capex Nvidia expects from the top five hyperscalers this year.
Analysts currently expect TSMC’s top line to increase by 43% in 2026, according to consensus estimates on Yahoo Finance, with robust double-digit growth projected through 2027 and 2028.
Counterpoint Research estimates that smartphone shipments could drop 14% in 2026 and 1% in 2027, but a projected 5% rebound in 2028 represents an additional growth catalyst for TSMC.
TSMC stock has appreciated 36% in 2026, trailing both Sandisk and Micron by a significant margin, yet that gap could close rapidly as AI accelerator demand accelerates the company’s earnings growth.
Analysts forecast a 59% spike in TSMC’s earnings in 2026, and the stock currently trades at just 20 times forward earnings, a discount to the Nasdaq-100’s forward multiple of 24.5.
If TSMC’s earnings reach $28.33 per share in 2028 and the stock trades at 30 times earnings at that point, its share price would climb to $850, roughly double its current level.
Investors hunting for an alternative play on the next wave of AI infrastructure spending may find that TSMC offers a compelling combination of scale, pricing power, and diversified customer exposure.
