TLDR
- TSM stock dropped 6.72% recently amid Chinese AI competition from DeepSeek
- TSMC plans to invest $100B in the US over the next four years
- China named TSMC in retaliatory 34% tariffs while Trump exempted it from US tariffs
- TSMC controls 90% of advanced chip production globally
- AI-related demand drove 58% growth in high-performance computing segment last year
Taiwan Semiconductor Manufacturing Company is weathering a storm of market volatility as global trade tensions and AI competition create both challenges and opportunities for the world’s dominant chip manufacturer.
The company’s stock recently fell 6.72% following news of DeepSeek, a Chinese AI software that rivals US competitors like ChatGPT. The revelation triggered a global investor sell-off across US indexes with tech companies suffering substantial losses.
TSMC, which controls an impressive 50% of the global foundry market, saw its stock price slump in late January. However, many analysts view this dip as a buying opportunity for investors.
Trade Tensions Impact
Global markets have experienced turbulence in the first quarter of 2025. President Trump announced new tariffs on Europe and China in March, with China facing a 54% tariff on goods effective April 9.
In response, China implemented “reciprocal” 34% tariffs on US goods, specifically naming TSMC among the companies that would be affected. These retaliatory measures caused US market indexes to experience their largest drop since the COVID-19 pandemic.
Despite being named in China’s tariff list, TSMC received good news when President Trump specifically mentioned the company in a speech nicknamed “Liberation Day.” He identified TSMC as a firm that would avoid tariffs from US government policies.
The company’s CEO C.C. Wei met with President Trump earlier this year. During this meeting, TSMC announced plans to invest $100 billion in new capital in the United States over the next four years to boost its presence in the country.
AI Driving Growth
TSMC’s strategic position in the AI supply chain has been a major growth driver. The company produces around 90% of the world’s advanced chips, making it essential to AI development.
While companies like Nvidia design GPUs critical for AI applications, TSMC manufactures these components. This relationship has been highly profitable for the chip manufacturer.
Last year, TSMC’s high-performance computing segment, which includes AI chips, grew by an impressive 58% year over year. This segment now represents 51% of the company’s total revenue of $90.1 billion.
For Q4 2024, TSMC reported revenue of $26.73 billion and earnings per share of $0.02. The company’s twelve-month trading price stands at $247.07, representing a potential upside of nearly 70%.
Looking ahead, TSMC management expects a mid-40% compound annual growth rate for AI accelerator revenue over the coming years. This optimistic outlook suggests the stock could perform well over the next five years despite current market challenges.
The company manufactures integrated circuits and semiconductor devices for key partners including Nvidia, Apple, and Advanced Micro Devices. These partnerships keep TSMC at the center of technological innovation.
TSMC’s stock has shown strong performance historically, rising over 200% in the past five years. However, it has pulled back 25% year to date due to market conditions and geopolitical tensions.
Hedge funds continue to show confidence in TSMC, with 186 hedge fund holders reported in Q4 2024. This places it fourth among the most popular stocks for hedge funds in its category.
The global economic environment remains challenging. The US economy is considered to be entering “continuous stagflation,” with continued inflation, low growth, and high unemployment. The Cboe Volatility Index is currently at 29.68%, well above its one-year average of 17.6%.
In this uncertain climate, TSMC’s dominant market position, essential role in AI development, and strong growth prospects make it a company of interest for investors seeking exposure to the semiconductor industry.
The latest tariff developments and investment announcements will likely continue to influence TSMC’s stock performance in the coming months as global trade tensions evolve.
