The TSM Myth: Why Algorithms Hate What Fundamentals Love

When TSMC released its November revenue figures on December 10, algorithmic traders did what they do best—panic. The stock plummeted 6% on the back of one data point: a month-over-month revenue decline of 6.5%, with November bringing in NT$343.61 billion (~$10.93 billion). To an automated system reacting to headlines without context, it looked like trouble. But scratch beneath the surface, and the narrative completely flips.

The Seasonal Story That Algorithms Miss

TSMC powers two distinct revenue engines, and understanding the difference between them is crucial to decoding why the November dip is actually predictable and irrelevant.

The smartphone industry operates on a calendar. Apple and competitors front-load chip orders in September and October to meet holiday demand. By November, that inventory rush naturally cools. This seasonal ebb is not a warning sign—it’s the rhythm of consumer electronics.

Meanwhile, the company’s other engine runs on a different schedule entirely. High-Performance Computing (HPC) for AI data centers operates year-round, independent of holiday cycles. In Q3 earnings, TSMC disclosed a critical threshold: HPC now accounts for 57% of total revenue. This structural shift means the AI momentum machine has become the company’s dominant growth driver, overshadowing the cyclical smartphone business. The seasonal dip that spooked traders is essentially noise obscuring a more important reality.

The Numbers Tell the Real Story

Investors panicked over a 6.5% monthly decline. But look at the year-over-year performance: November 2025 revenue surged 24.5% compared to November 2024. This divergence is the true indicator.

Now for the Q4 math. Management guided for fourth-quarter revenue between $32.2 billion and $33.4 billion (approximately NT$1 trillion). With October and November combined at NT$711.09 billion (~$22.64 billion), TSMC needs roughly NT$300 billion (~$9.55 billion) from December. Recent monthly performance consistently exceeds this threshold. Hitting guidance—or beating it—is not a possibility; it’s a probability.

The alleged “miss” was simply October being an unusually strong month to follow. That’s not weakness; that’s the mathematical consequence of sequential strength.

Management’s Confidence You Can’t Ignore

Actions speak louder than headlines. TSMC recently signaled plans to increase its dividend to approximately 97 cents per share, payable in April 2026. In the capital-intensive semiconductor industry, dividend increases during supposed downturns are rare. Companies typically hoard cash when growth is uncertain.

This forward guidance is management’s way of telling shareholders they expect sustained, robust cash flows. When executives who review internal order books commit to higher payouts, they’re placing a bet on the future. The dividend hike reflects confidence, not concern.

The Valuation Mismatch

Here’s where the opportunity emerges. Despite the sell-off, the market is potentially undervaluing the business:

Current Trading Metrics:

• Price-to-Earnings Ratio: ~29.5x
• Gross Margins: 59.5% (keeping 60 cents of profit per dollar of sales)
• Year-to-Date Revenue Growth: Exceeding 30%

For a capital-intensive business with near-monopoly characteristics, these margins are exceptional. Typically, companies with this combination command premium valuations well above 30x earnings. The recent pullback has created a rare window where the stock trades below its structural worth.

At $287 per share, the stock sits significantly below the average analyst price target of $355, implying 23%+ upside potential. Wall Street’s consensus appears to have absorbed the fundamentals in a way the algorithm-driven market hasn’t.

Why This Matters for the AI Supercycle

The broader context cannot be ignored. We’re in the early-to-middle stages of an AI infrastructure buildout. Data centers are being constructed and upgraded year-round, capital is flowing relentlessly into semiconductor manufacturing capacity, and demand for advanced chips continues to accelerate.

TSMC is the bottleneck in this supply chain—the critical gatekeeper of advanced semiconductor production. As long as AI development continues, TSMC’s structural growth engine will keep running.

The seasonal dip in smartphone orders? Temporary. The expansion of data center demand? Structural and durable. The market conflated the two, creating a buying opportunity for disciplined investors who can distinguish between noise and signal.

The myth is that November’s revenue decline signals trouble. The reality is that TSMC’s competitive moat and AI-driven growth narrative remain intact.