Is Taiwan Semi Stock a Buy, Sell, or Hold on Plans to Invest $100 Billion in the U.S.?
Taiwan Semiconductor Manufacturing Company Limited (TSM), the world's largest contract chip maker, is deepening its commitment to U.S. semiconductor production with a $100 billion investment. This move builds on the company's existing $65 billion effort in Phoenix, Arizona, bringing its total U.S. commitment to $165 billion. The expansion includes three new fabrication plants, two advanced packaging facilities, and a major R&D team center.
A key driver behind this expansion is the U.S. government's push to localize semiconductor production. President Donald Trump had long advocated for reducing reliance on foreign chipmakers, imposing heavy tariffs on imports to incentivize domestic production. The U.S. government has encouraged this shift through the 2022 Chips Act, offering significant subsidies - though Trump has more recently cast doubt on his support for the legislation.
While TSM stock jumped 6% on its $100 billion U.S. expansion news, it's still 18.6% off its YTD high of $226.40. Is this a prime buy-the-dip moment, or should investors stay patient?
About Taiwan Semiconductor Stock
Nestled in the tech hub of Hsinchu City, Taiwan, Taiwan Semiconductor Manufacturing Company Limited (TSM) reigns as the world's largest integrated circuit foundry. With a market cap of $955.8 billion, it stands as a silent force behind some of the most powerful chips on the planet.
Taiwan Semiconductor's dominance extends deep into the artificial intelligence (AI) revolution. AI demands cutting-edge, high-performance chips, and TSMC happens to be one of the few manufacturers capable of delivering them at scale.
The stock's performance speaks volumes. Over the past 52 weeks, TSM has soared 25%, leaving the S&P 500 Index's ($SPX) 12.2% gain trailing behind. Over the past six months, the stock climbed 12.8%, roughly doubling the S&P 500's 5.8% rise.
TSMC is not just the backbone of AI's future, but the stock is also a bargain currently. Trading at 19.57 times forward earnings with a price/earnings-to-growth (PEG) ratio of 0.59, it is cheaper than both the tech sector medians and its own historical averages. Despite its dominance in advanced chipmaking, TSM stock remains attractively priced.
Moreover, the company keeps rewarding shareholders, paying dividends for 20 years. Its quarterly NT$4.50 per share payout continues, with distributions set for April 10 and July 10, 2025. Its annual dividend stands at $2.46 per share, offering a yield of 1.33%, edging past the SPDR S&P 500 ETF Trust's (SPY) 1.21% yield.
Taiwan Semiconductor Surpasses Q4 Earnings
On Jan. 16, Taiwan Semiconductor delivered record-breaking fiscal Q4 profits, fueled by soaring demand for AI microchips and processors. Its revenue for the quarter surged 38.8% year-over-year to $26.9 billion, surpassing analyst expectations, while EPS climbed 57% from the prior year to $2.24, slightly ahead of Wall Street's $2.20 estimate. High-Performance Computing (HPC), comprising AI and 5G applications, made up 53% of sales - up from 43% last year.
TSMC is playing a high-stakes game, navigating U.S. export controls while doubling down on its cutting-edge chipmaking. Advanced nodes drove 74% of Q4 wafer revenue, and with 3nm in full swing and 2nm on the horizon, its tech edge remains sharp. Expanding fabs in Arizona and Japan, TSMC is hedging risks while fueling AI giants like Nvidia (NVDA) and Apple (AAPL).
Looking ahead, management expects revenue in the first quarter of fiscal 2025 to range between $25 billion and $25.8 billion, marking a 34.7% annual increase at the midpoint. To fuel its expansion, the company is set to invest heavily, with a capital budget ranging from $38 billion to $42 billion in fiscal 2025.
The future looks even brighter. Over the five-year period starting in 2024, RSMC anticipates its long-term revenue growth to approach a 20% CAGR in the U.S. dollar term, driven by its smartphone, HPC, Internet of Things (IoT), and automotive platforms.
For the fiscal Q1 of 2025, analysts predict an EPS of $2.03, reflecting a 47.1% year-over-year increase. Looking further ahead, EPS for the current fiscal year is projected to grow by 30.7% from the prior year to $9.20, and rise by another 19.9% to $11.03 in fiscal 2026.
What Do Analysts Expect for Taiwan Semi Stock?
This rising demand for high-performance AI chips has led to increased orders for TSMC's most advanced production technologies, and Wall Street analysts remain optimistic. Bank of America Securities analyst Brad Lin reaffirmed a 'Buy' rating with a $250 price target, citing improving gross margins driven by price adjustments, better yields, and a favorable product mix.
Bernstein's Mark Li maintained a similar stance, setting a $251 target, while Barclays Plc has raised its estimate from $240 to $255, maintaining an "Overweight" rating.
Overall, TSM has a solid 'Strong Buy' consensus rating. Among 11 analysts covering the stock, eight advocate a 'Strong Buy,' while two recommend a 'Moderate Buy.' Meanwhile, one suggests a 'Hold.'
TSM's average analyst price target of $244.50 represents potential upside of 37.5%, while the Street-high target of $265 suggests that the stock can climb as much as 49.2% from here.
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