TSM Stock Trades Near 52-Week High: Time to Hold or Book Profits?

Core Insights - Taiwan Semiconductor Manufacturing Company (TSMC) has seen its shares increase by 46.5% year to date, driven by the AI boom and demand for advanced chips from major clients like NVIDIA, Broadcom, and Marvell Technology [1][2][8] Financial Performance - TSMC's revenues for Q3 2025 rose by 41% year over year to $33.1 billion, with earnings per share increasing by 39% to $2.92, largely due to demand for 3nm and 5nm chips [9][10] - The company raised its revenue growth guidance for full-year 2025 to a mid-30% range, up from around 30% previously projected [10] Market Position - TSMC is a leader in the global chip foundry market, with AI-related chip sales tripling in 2024 and expected to double again in 2025 [5][6] - The company is investing aggressively, with capital expenditures projected between $40 billion and $42 billion in 2025, significantly higher than the $29.8 billion planned for 2024 [7][8] Valuation - Despite the stock's strong performance, TSMC trades at a forward 12-month price-to-earnings (P/E) multiple of 24.15, lower than the sector average of 29.15, making it attractive for long-term investors [11][14] Competitive Landscape - Compared to other semiconductor companies, TSMC has a lower P/E ratio than Broadcom, NVIDIA, and Marvell Technology, which trade at P/E multiples of 53.10, 33.53, and 28.91, respectively [14] Growth Drivers - The demand for AI chips is a significant growth catalyst, with management expecting AI revenues to grow 40% annually over the next five years [6][8] Strategic Challenges - TSMC faces near-term challenges, including softness in key markets like PCs and smartphones, which are projected to see only low single-digit growth in 2025 [15] - The company's global expansion strategy, including new fabs in the U.S., Japan, and Germany, may pressure margins due to higher costs and lower utilization rates initially [16] - Geopolitical tensions, particularly U.S.-China relations, pose strategic risks, as TSMC has significant revenue exposure to China [17]