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Although President Donald Trump has so far exempted semiconductors from import tarifs, perhaps in a sign of how important artificial intelligence (AI) is to the economy, chip makers have not been spared from stock market turmoil. Last week, Trump announced new export restrictions on advanced chips to China. This lead Nvidia to estimate a hit of $5.5 billion from the tighter government controls.
Yet, that has not dented the optimism around the world’s largest contract manufacturer of chips.
About Taiwan Semi Stock
Taiwan Semiconductor Manufacturing Company (TSM), known commonly as TSMC, is the world’s largest dedicated semiconductor foundry. It pioneered the “pure-play” foundry model, focusing solely on manufacturing chips designed by other companies like Nvidia (NVDA), Advanced Micro Devices (AMD), and Qualcomm (QCOM) among others.
Amid wider market concerns and overall weakness in the tech sector, the TSM stock is down 20.1% on a YTD basis while offering a dividend yield of 1.74%.
So, following the recent selloff, has the risk-reward turned favorable for TSMC? It seems that this is the case, and here are the possible reasons why.
Solid Fundamentals
TSMC has been a reliable performer, with revenue and earnings clocking healthy 10-year compound annual growth rates (CAGRs) of 14.14% and 16.45%, respectively.
Moreover, the most recent quarter saw the company reporting a beat on both revenue and earnings. Revenue for Q1 2025 stood at $25.53 billion, which marked yearly growth of 35.3% while earnings witnessed an even sharper uptick of 53.6% in the same period to $2.12 per share, exceeding the consensus estimate of $2.07 per share. Notably, the past 16 quarters have seen the company miss earnings estimates only twice. Investors should note that earnings reported in New Taiwan dollars were up 60% year-over-year.
In terms of outlook, TSMC expects revenue to be between $28.4 billion and $29.2 billion in Q2 2025, the midpoint of which represents yearly growth of 38.3%, reflecting continued strong demand for its services.
Thus, analysts are predicting forward revenue and earnings growth rates of 24.62% and 27.55%, much higher than the sector medians of 6.65% and 10.16%.
Strategic Tailwinds
Despite considerable tariff uncertainties that have posed a threat to the global supply chain system, the key role that TSMC plays in the semiconductor industry makes it a compelling investment.
Meanwhile, TSMC’s push into 3-nanometer fabrication has placed it at the forefront of rising demand for energy-efficient chips, particularly as AI-related applications continue to expand rapidly. The company is not slowing down either — it plans to begin production using its 2-nanometer process technology in the latter half of the year, marking a significant step forward. Further down the line, a next-generation iteration known as N2P is in development for a 2026 rollout, which is expected to deliver even greater performance and power efficiency. Industry observers already consider TSMC’s 2-nanometer architecture the most advanced in existence, and the firm is likely to enjoy a temporary exclusivity in the supply of such cutting-edge chips until competitors are able to close the gap. This reinforces TSMC’s already dominant market position.
In parallel, TSMC is taking proactive steps to counteract the long-term effects of global trade tensions. As part of a sweeping $165 billion investment in the United States, the company is establishing three wafer fabrication plants, two high-end chip packaging facilities, and a major research and development center in Arizona. Once operational, these sites are projected to host around 30% of TSMC’s 2-nanometer and beyond-node capacity. By shifting a significant portion of its most advanced production outside Taiwan, the company reduces its vulnerability to geopolitical shocks and enhances its long-term growth potential.
As TSMC leads the broader effort to reanchor high-tech chip manufacturing within the U.S., it not only secures greater supply chain resilience but also sets the stage for stronger margin performance over time. Although trade friction could begin to weigh more heavily on global semiconductor expansion beyond 2026, TSMC’s strategic positioning and scale-up trajectory give it considerable leeway to navigate future disruptions.
Analyst Opinions on TSM Stock
Considering all this, analysts have assigned a rating of “Strong Buy” for TSMC with a mean target price of $231.25 which denotes upside potential of about 47% from current levels. Out of 11 analysts covering the stock, eight have a “Strong Buy” rating, two have a “Moderate Buy” rating, and one has a “Hold” rating.
