TSM Hits 52-Week High: Should You Hold the Stock or Book Profits?

Core Insights - Taiwan Semiconductor Manufacturing Company (TSMC) shares reached a 52-week high of $333.08, closing at $327.43, with a 57.9% increase over the past year, outperforming the Zacks Computer and Technology sector's 25.3% gain [1][6] Financial Performance - In Q3 2025, TSMC's revenues increased by 41% year-over-year to $33.1 billion, and earnings per share (EPS) rose by 39% to $2.92, driven by demand for advanced 3nm and 5nm nodes, which now represent 60% of total wafer sales [11] - TSMC raised its revenue growth guidance for full-year 2025 to a mid-30% range, up from the previous estimate of around 30%, with analysts projecting a 20.8% revenue increase and a 20% EPS increase for 2026 [12] Market Position and Demand - TSMC is benefiting from the AI boom, manufacturing advanced chips for major clients like NVIDIA, Broadcom, and Marvell, with AI-related chip sales expected to contribute approximately 30% of total revenues by 2025, up from mid-teens in 2024 [2][8] - The company is the leading player in the global chip foundry market, with significant demand for its advanced manufacturing processes [7] Investment and Growth Strategy - TSMC plans to invest between $40 billion and $42 billion in capital expenditures in 2025, focusing 70% of this spending on advanced manufacturing processes to maintain its competitive edge [9][10] Competitive Landscape - TSMC's stock performance has outpaced peers like Broadcom and NVIDIA, which saw increases of 50.3% and 34% respectively, while Marvell Technology's stock declined by 25.3% [3] Valuation and Market Sentiment - TSMC's stock trades at a forward P/E ratio of 26.74, higher than the sector average of 23.19, but lower than Broadcom, NVIDIA, and Marvell [16][20] - Investor confidence in TSMC's long-term prospects remains strong despite market volatility and geopolitical risks [6] Risks and Challenges - Near-term risks include softness in PC and smartphone markets, which may limit growth despite rising AI demand [13] - The company's global expansion strategy, including new fabs in the U.S., Japan, and Germany, may lead to higher costs and lower gross margins in the short term [14] - Geopolitical tensions, particularly U.S.-China relations, pose strategic risks due to TSMC's revenue exposure to China [15]