Taiwan Semiconductor Started 2nm Chip Production. Time to Buy?

Taiwan Semiconductor Manufacturing (NYSE:TSM) shares have been unstoppable in the past year, gaining more than 52%, thanks in part to a handful of incredible quarters. The big 2025 winner has what it takes to keep on winning in the new year, so say analysts over at JP Morgan. With 2nm chip production kicking off just a few weeks ago, investors seem as pumped as ever to jump into a fab titan that continues to lead the charge.

Entering 2nm production isn’t a shocker by any stretch, but it is a sign that Taiwan Semiconductor and the rest of the semiconductor industry are on schedule, and that could mean big things as AI demand takes an upward turn in 2026.

While there’s a lot of earnings momentum behind the foundry giant, with shares now going for just north of 33.0 times trailing price-to-earnings (P/E) after spending much of 2025 with a trailing P/E multiple in the mid-to-high 20s, it remains to be seen if the multiple can expand any further, especially given the geopolitical risks involved with the Taiwan-based firm as well as growing competition in the foundry space, as Intel (NASDAQ:INTC) gains serious traction.

Intel’s foundry business is coming, but that probably won’t take the wind out of Taiwan Semiconductor’s sails

JPMorgan analyst Gokul Hariharan doesn’t sound too concerned as Intel picks up momentum in fabs, especially given their belief that most “mission-critical” projects involving the 2nm process will go to Taiwan Semiconductor. Undoubtedly, it’s best to stick with what’s more critical with the seasoned veteran, even as the U.S.-based rival looks to win over business and prove itself that it can rise again.

Of course, being based out of America is a huge edge for Intel as its foundry business expands. But given Taiwan Semiconductor is operating at such a high level, I do think a gradual move to the likes of an Intel is in the cards, rather than a big shifting of business, especially given the strong relationship Taiwan Semiconductor has with its biggest customers, including Nvidia (NASDAQ:NVDA) and Apple (NASDAQ:AAPL).

Additionally, Hariharan thinks Intel “may need to prove its execution,” especially when it comes to “leading-edge process nodes.” That’s the right way to think about it, at least in my opinion. I think Hariharan is right on the money to discount the potential impact of Intel’s continued push into fabs.

If anything, it’s Taiwan Semiconductor’s exceptional execution and experience that is a source of its wide economic moat. And while Intel Foundry will become a bigger deal over time, I see no reason both fab juggernauts can’t win big as semiconductor demand continues flying high, as AI demand stays hot and becomes even hotter.

Taiwan Semiconductor continues to lead the charge

With 2nm production running at full speed and the A16 (1.6nm) process, and N2P (enhanced 2nm variant) readying for product later in the year, Taiwan Semiconductor is already gearing up for what comes next. Perhaps the long-term roadmap is a bigger reason to stick with shares of Taiwan Semiconductor than the start of 2nm production.

Either way, it’s hard not to be bullish on the company as the AI revolution looks to monetize. With Susquehanna holding the Wall Street-high price target of $400.00 on the shares, there seems to be more upside to be had in the year ahead as the foundry leader ramps like never before.

If 2026 is the year that sees AI chips experience a supercycle (memory chips certainly seem to be in one), perhaps Taiwan Semiconductor stock deserves to go for a premium multiple. And given the growth around the corner, perhaps a richer premium is warranted. Perhaps the earnings potential has finally dwarfed the lingering geopolitical risks unique to the name.