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Semiconductor Giant TSMC: Is It Still A Buy?

Semiconductor Giant TSMC: A Deep Dive into its Stock’s Fundamentals and Technicals

We will dive into the semiconductor industry by focusing on one company that dominates it entirely: Taiwan Semiconductor Manufacturing Company (TSMC). The company is so influential that discussing it feels like analysing the entire sector. TSMC has been a consistent subject of conversation for investors, and in optimistic discussion about the market and AI in 2025.

TSMC is a crucial part of the semiconductor value chain, producing the most advanced chips, such as those designed by NVIDIA (NVDA) needed for processing AI models. So, we will revisit its fundamentals and technical indicators. Whether you’ve been holding this stock for years or considering adding it to your portfolio, this post will give you insights to make informed decisions.

TSMC’s Impressive Fundamentals

TSMC recently announced stellar figures, driving its stock price up by more than 5% on the first trading day after the announcement. Let’s break down the key numbers:

  1. Profit Growth: Quarterly profit soared by 57%, reaching over $11 billion. Such growth underscores the company’s efficient operations and robust demand for its chips.

  2. Revenue Breakdown:

    • 51% of their chips power data centers.
    • 37% cater to smartphones.
    • Only 6% serve the automotive industry, including electric vehicles.
     

    The decreasing revenue share from China (down to 10% from 16-17% previously) reflects geopolitical tensions. Yet, TSMC’s heavy North American exposure (65% of net revenue, with Apple and NVIDIA as major clients) offers a stable revenue base.

  3. Investment for Growth: TSMC plans to invest $42 billion in new fabs, including projects in Arizona, Japan, and Germany. These investments position the company to meet rising global demand for chips, projected to grow by 40% annually.

  4. Gross Margins: Despite a slight dip from 59% to 58% last quarter, TSMC remains highly profitable. The CEO has stated that maintaining a gross margin above 60% is unrealistic but unnecessary for continued success.

  5. Future Outlook: TSMC projects 25% revenue growth this year and 20% annually over the next six years. With a growing market and cutting-edge technology, the company appears well-positioned to capitalize on industry trends.

For more, see our deeper analysis on if AI is a Bubble or Not.
 

Valuation Perspective

At a share price above $200, TSMC trades at approximately 30 times earnings (with an EPS of $7 over the past year). While not cheap, this valuation is reasonable for a market leader controlling 90% of advanced chip production. The company’s monopolistic power, coupled with the sector’s growth trajectory, makes it an attractive long-term investment.

Technical Analysis Insights

While fundamentals tell us what to buy, technical analysis helps us decide when. Here’s a breakdown of TSMC’s recent price movements:

  1. Candlestick Chart: Over the past 4.5 years, TSMC’s daily candlesticks reflect the market’s reaction to news and events. The recent price jump above the 50-day moving average ($216) signals bullish momentum.

  2. Moving AveragesThe 50-day moving average shows short-term trends. Comparing the 30-day and 90-day averages highlights longer-term trends. Since the 30-day average remains above the 90-day, the uptrend is intact.

  3. Relative Strength Index (RSI)RSI measures whether a stock is overbought (above 70) or oversold (below 30). Currently, TSMC’s RSI is in the middle, suggesting the stock isn’t overextended in either direction.

  4. Trend LinesDrawing trend lines from 2022 to today reveals a clear upward trajectory. TSMC recently broke above a resistance level near $205, reinforcing its bullish outlook.

Key Takeaways for Investors

Whether you’re a long-time investor or new to TSMC, here’s how you can use this analysis:

  1. If You Own TSMC: You’re likely sitting on significant gains, especially if you bought during the dip in 2022. Use technical indicators like RSI and moving averages to assess whether to hold or take partial profits.

  2. If You’re Considering Buying: The current price isn’t cheap, but TSMC’s dominant position and growth potential make it a strong candidate for long-term portfolios. Consider waiting for a pullback to lower levels for a better entry point.

  3. Sector Insights: The semiconductor industry is poised for massive growth, driven by demand for AI, data centers, and electric vehicles. TSMC’s investments in cutting-edge fabs ensure it will remain a key player.

If you want to learn more about fundamental and technical analysis techniques, we recommend you take our course through the Academy For Investors.

The AI technology optimism we have identified holds potential opportunities for sustained growth, but as well presents investors with risks of overvaluation and volatility. Diversify wisely, such as by using Exchange Traded Funds (ETFs) to instantly reduce your exposure, available on the trading platforms we offer our clients.

Stay informed, such as by following our YouTube channel for the latest market insights.

To see the vlog version of this article, please see our YouTube channel and make sure to like and subscribe

If you’d like to explore how this situation might fit into your investment strategy, and if you are interested in getting help with applying fundamental and technical analysis techniques, contact us an schedule a visit our office on Marbella’s Golden Mile.

We wish all investors a successful 2025! Trade Saf€.

Kaspar Huijsman

Kaspar is a passionate investor known for his thorough analysis of news and market
dynamics. With over 25 years of experience in the financial world, he never relies on half- truths and always prioritizes knowledge.

“An investment in knowledge pays the best interest.”
— Kaspar Huijsman

The information in this article should not be interpreted as individual investment advice. Although Hugo compiles and maintains these pages from reliable sources, Hugo cannot guarantee that the information is accurate, complete and up-to-date. Any information used from this article without prior verification or advice, is at your own risk. We advise that you only invest in products that fit your knowledge and experience and do not invest in financial instruments where you do not understand the risks.

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