TSMC Stock Skyrockets: The Semiconductor Giant’s Stunning Rally Explained

Taiwan Semiconductor Manufacturing Company (TSMC) shares are on a tear—again. The chipmaker's stock surged today, leaving investors scrambling to decode the rally. Here's what's fueling the frenzy.

AI Demand & Supply Squeeze

TSMC’s cutting-edge nodes are the golden ticket for AI chipmakers. With Nvidia, AMD, and Apple fighting for wafer capacity, TSMC’s pricing power just hit ludicrous mode. Shortages? More like strategic scarcity.

Geopolitical Tailwinds (or Headwinds?)

Washington’s latest CHIPS Act sweeteners have analysts upgrading TSMC’s Arizona expansion from ‘pipe dream’ to ‘maybe plausible.’ Meanwhile, China hawks are buying shares while quietly drafting contingency plans.

Earnings Beat the Street—Again

Another quarter, another guidance raise. TSMC’s gross margins are now so high they’re triggering PTSD for anyone who shorted the stock in 2022.

The bottom line? In a world addicted to silicon, TSMC isn’t just the dealer—it owns the pharmacy. Just don’t ask Wall Street if the valuation’s sustainable (we all know how that movie ends).

Image source: Getty Images.

TSMC stock rallies on tariff exemption

TSMC will not be subject to a recently announced 100% import tax on foreign-sourced semiconductors. Given that TSMC is the far-and-away leader when it comes to contract semiconductor manufacturing services, the development suggests huge benefits for the company and also the broader semiconductor industry.

Being exempt from the new tariff should help keep TSMC's strong sales and earnings momentum alive and also strengthen it against competitors. While the company already holds a dominant position in the contract chip manufacturing space, the new tariffs will make it even harder for Samsung and other non-domestic chip fabricators to gain market share from TSMC.

What's next for TSMC?

TSMC has been posting very strong sales and earnings growth as demand for artificial intelligence (AI) semiconductors and other chips for data centers has soared. According to some estimates, the company manufactures somewhere around 90% of the world's advanced AI chips -- and its fabrication technologies offer performance advantages that make it likely that the category leader will retain its command over the market for the foreseeable future.

As a result of its importance in the AI space and broader chipmaking capabilities, TSMC has taken on a high level of geopolitical importance. The company's exemption from the new chip tariffs stemmed from its moves to dramatically increase its U.S. manufacturing operations, and geopolitical dynamics will likely continue to be a key performance catalyst for the stock.