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Taiwan Semiconductor Stock Up 26% in 6 Months: Hold or Book Profits?
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Key Takeaways
TSM shares rose 26% in six months, topping peers and the Zacks Computer and Technology sector.
AI-related chip sales tripled in 2024, with management guiding for continued multi-year growth.
TSM lifted its 2025 revenue growth outlook to 30% as Q2 sales jumped 44% and EPS soared 61%.
Taiwan Semiconductor Manufacturing Company (TSM - Free Report) , also known as TSMC, has seen its share price soar 25.6% over the past six months. This surge has significantly outperformed the broader Zacks Computer and Technology sector, which gained 16.7% during the same period.
Taiwan Semiconductor stock has also outpaced several chip peers, including KLA Corporation (KLAC - Free Report) , ON Semiconductor Corporation (ON - Free Report) and Applied Materials, Inc. (AMAT - Free Report) . Shares of KLA Corporation, ON Semiconductor and Applied Materials have risen 17.8%, 2.8% and 0.6%, respectively, in the past six months.
Six-Month Price Return Performance
Image Source: Zacks Investment Research
The outperformance suggests that investors remain confident in TSMC’s long-term story despite ongoing trade and geopolitical risks. Given the fundamentals, the stock appears to be a hold for now rather than selling it and booking a profit.
AI Boom Fuels Multi-Year Tailwinds for TSMC
Taiwan Semiconductor continues to lead the global chip foundry market. Its scale and technology make it the first choice for companies driving the AI boom. NVIDIA, Marvell and Broadcom all count on TSMC to build advanced GPUs and AI accelerators.
AI-related chip sales have become a major driver. In 2024, AI-related revenues tripled, making up a mid-teen percentage of Taiwan Semiconductor’s total revenues, and the momentum is far from over. Management expects AI revenues to double again in 2025 and grow 40% annually over the next five years. That makes TSMC central to the AI supply chain.
To keep up with the growing demand for AI chips, Taiwan Semiconductor is spending aggressively. The company is set to invest between $38 billion and $42 billion in capital expenditures in 2025, far outpacing its $29.8 billion investment in 2024. The bulk of this spending, around 70%, is focused on advanced manufacturing processes, ensuring TSMC stays ahead of other chip manufacturing rivals.
TSMC’s Resilient Financial Performance
Taiwan Semiconductor’s latest earnings report highlights just how dominant the company remains. In the second quarter of 2025, TSM’s revenues surged 44% year over year to $30.07 billion, while EPS jumped 61% to $2.47. This growth was powered by the booming demand for its advanced 3nm and 5nm nodes, which now account for 58% of total wafer sales. Gross margins improved 540 basis points to 58.6%, reflecting better cost efficiencies.
Taiwan Semiconductor Manufacturing Company Ltd. Price, Consensus and EPS Surprise
Buoyed by strong demand for its 3nm and 5nm chips, Taiwan Semiconductor raised its revenue growth guidance for full-year 2025 to 30% from mid-20% projected earlier. For the third quarter, TSMC expects revenues in the range of $31.8-$33 billion, calling for a sequential increase of 6%-10%. The Zacks Consensus Estimate for third-quarter and full-year 2025 revenues is pegged at $32.31 billion and $122.4 billion, respectively.
Favorable Valuation: A Reason to Hold TSM Stock
Despite a robust rally, Taiwan Semiconductor stock still looks reasonably priced. It trades at a forward 12-month price-to-earnings (P/E) multiple of 21.83, which is lower than the sector average of 27.25. This discount adds to the appeal for long-term investors.
TSM Forward 12-Month P/E Multiple
Image Source: Zacks Investment Research
Compared with other major semiconductor players, Taiwan Semiconductor has a lower P/E ratio than KLA Corporation but has a higher multiple than ON Semiconductor and Applied Materials. At present, KLA Corporation, ON Semiconductor and Applied Materials trade at P/E multiples of 24.16, 17.45 and 16.6, respectively.
Short-Term Headwinds Are Still in Play for TSM Stock
Despite its strengths, Taiwan Semiconductor witnesses near-term hurdles. Softness in key markets like PCs and smartphones also dampens near-term prospects. These traditionally strong revenue drivers are projected to see only low single-digit growth in 2025, limiting Taiwan Semiconductor’s growth despite rising AI demand.
The company’s global expansion strategy adds further strain. New fabs in the United States (Arizona), Japan and Germany are vital for geopolitical risk mitigation, but they come with higher costs. These facilities are expected to drag down gross margins by 2-3 percentage points annually over the next three to five years due to higher labor and energy costs, along with lower utilization rates in the early stages.
Escalating geopolitical tensions, particularly U.S.-China relations, pose strategic risks. With significant revenue exposure to China, Taiwan Semiconductor is vulnerable to export restrictions, supply-chain disruptions or further regulatory pressure. These uncertainties could weigh on near-term performance.
Final Thoughts: Hold TSM Stock for Now
Taiwan Semiconductor remains a cornerstone of the semiconductor industry. Its unmatched capabilities in advanced chip manufacturing, strong exposure to AI demand and expanding capacity give it a solid long-term trajectory.
However, short-term headwinds, including weakness across the consumer end market, global expansion pressures and geopolitical friction, call for a more cautious stance. Given its valuation and growth backdrop, holding the stock makes the most sense right now.
Image: Bigstock
Taiwan Semiconductor Stock Up 26% in 6 Months: Hold or Book Profits?
Key Takeaways
Taiwan Semiconductor Manufacturing Company (TSM - Free Report) , also known as TSMC, has seen its share price soar 25.6% over the past six months. This surge has significantly outperformed the broader Zacks Computer and Technology sector, which gained 16.7% during the same period.
Taiwan Semiconductor stock has also outpaced several chip peers, including KLA Corporation (KLAC - Free Report) , ON Semiconductor Corporation (ON - Free Report) and Applied Materials, Inc. (AMAT - Free Report) . Shares of KLA Corporation, ON Semiconductor and Applied Materials have risen 17.8%, 2.8% and 0.6%, respectively, in the past six months.
Six-Month Price Return Performance
Image Source: Zacks Investment Research
The outperformance suggests that investors remain confident in TSMC’s long-term story despite ongoing trade and geopolitical risks. Given the fundamentals, the stock appears to be a hold for now rather than selling it and booking a profit.
AI Boom Fuels Multi-Year Tailwinds for TSMC
Taiwan Semiconductor continues to lead the global chip foundry market. Its scale and technology make it the first choice for companies driving the AI boom. NVIDIA, Marvell and Broadcom all count on TSMC to build advanced GPUs and AI accelerators.
AI-related chip sales have become a major driver. In 2024, AI-related revenues tripled, making up a mid-teen percentage of Taiwan Semiconductor’s total revenues, and the momentum is far from over. Management expects AI revenues to double again in 2025 and grow 40% annually over the next five years. That makes TSMC central to the AI supply chain.
To keep up with the growing demand for AI chips, Taiwan Semiconductor is spending aggressively. The company is set to invest between $38 billion and $42 billion in capital expenditures in 2025, far outpacing its $29.8 billion investment in 2024. The bulk of this spending, around 70%, is focused on advanced manufacturing processes, ensuring TSMC stays ahead of other chip manufacturing rivals.
TSMC’s Resilient Financial Performance
Taiwan Semiconductor’s latest earnings report highlights just how dominant the company remains. In the second quarter of 2025, TSM’s revenues surged 44% year over year to $30.07 billion, while EPS jumped 61% to $2.47. This growth was powered by the booming demand for its advanced 3nm and 5nm nodes, which now account for 58% of total wafer sales. Gross margins improved 540 basis points to 58.6%, reflecting better cost efficiencies.
Taiwan Semiconductor Manufacturing Company Ltd. Price, Consensus and EPS Surprise
Taiwan Semiconductor Manufacturing Company Ltd. price-consensus-eps-surprise-chart | Taiwan Semiconductor Manufacturing Company Ltd. Quote
Buoyed by strong demand for its 3nm and 5nm chips, Taiwan Semiconductor raised its revenue growth guidance for full-year 2025 to 30% from mid-20% projected earlier. For the third quarter, TSMC expects revenues in the range of $31.8-$33 billion, calling for a sequential increase of 6%-10%. The Zacks Consensus Estimate for third-quarter and full-year 2025 revenues is pegged at $32.31 billion and $122.4 billion, respectively.
Favorable Valuation: A Reason to Hold TSM Stock
Despite a robust rally, Taiwan Semiconductor stock still looks reasonably priced. It trades at a forward 12-month price-to-earnings (P/E) multiple of 21.83, which is lower than the sector average of 27.25. This discount adds to the appeal for long-term investors.
TSM Forward 12-Month P/E Multiple
Image Source: Zacks Investment Research
Compared with other major semiconductor players, Taiwan Semiconductor has a lower P/E ratio than KLA Corporation but has a higher multiple than ON Semiconductor and Applied Materials. At present, KLA Corporation, ON Semiconductor and Applied Materials trade at P/E multiples of 24.16, 17.45 and 16.6, respectively.
Short-Term Headwinds Are Still in Play for TSM Stock
Despite its strengths, Taiwan Semiconductor witnesses near-term hurdles. Softness in key markets like PCs and smartphones also dampens near-term prospects. These traditionally strong revenue drivers are projected to see only low single-digit growth in 2025, limiting Taiwan Semiconductor’s growth despite rising AI demand.
The company’s global expansion strategy adds further strain. New fabs in the United States (Arizona), Japan and Germany are vital for geopolitical risk mitigation, but they come with higher costs. These facilities are expected to drag down gross margins by 2-3 percentage points annually over the next three to five years due to higher labor and energy costs, along with lower utilization rates in the early stages.
Escalating geopolitical tensions, particularly U.S.-China relations, pose strategic risks. With significant revenue exposure to China, Taiwan Semiconductor is vulnerable to export restrictions, supply-chain disruptions or further regulatory pressure. These uncertainties could weigh on near-term performance.
Final Thoughts: Hold TSM Stock for Now
Taiwan Semiconductor remains a cornerstone of the semiconductor industry. Its unmatched capabilities in advanced chip manufacturing, strong exposure to AI demand and expanding capacity give it a solid long-term trajectory.
However, short-term headwinds, including weakness across the consumer end market, global expansion pressures and geopolitical friction, call for a more cautious stance. Given its valuation and growth backdrop, holding the stock makes the most sense right now.
Taiwan Semiconductor carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.