TSMC's 25% Growth Forecast Clashes with Execution Risks Highlighted in DeepValue Report

What happened

TSMC projects a 25% compound annual revenue growth through 2029, potentially doubling earnings at current margins, as reported by The Motley Fool. This optimistic outlook is driven by sustained AI/HPC demand, evidenced by January 2026 revenue surging 36.8% year-over-year. However, DeepValue's analysis rates the stock a 'WAIT' at $367, noting it already prices in AI-driven growth and successful execution of $52-56 billion 2026 capex. Critical risks include margin dilution from new technology ramps, overseas expansion costs, and high customer concentration at 76% from top ten clients. Investors must verify that revenue growth translates to maintained margins, with upcoming monthly sales and Q1 results serving as key checkpoints.

Implication

TSMC's revenue forecast supports the AI narrative but overlooks margin pressures from capex and tech transitions. Current valuation embeds perfect execution, yet filings warn of dilution risks during ramps and overseas builds. High customer concentration increases earnings volatility, especially amid AI demand swings. Elevated capex of $52-56 billion for 2026 raises depreciation concerns that could compress profitability. Thus, monitor upcoming financial releases for evidence of margin sustainability before increasing exposure.

Thesis delta

The 25% growth projection reinforces bullish scenarios but does not address core risks identified in DeepValue's report. Our thesis remains unchanged: wait for confirmatory evidence on margin sustainability and capex efficiency over the next 3-6 months, as the stock's 'WAIT' rating is still justified by execution uncertainties.