Are Rising Geopolitical Tensions a Reason to Sell Taiwan Semiconductor Stock?

Core Viewpoint - Investors are increasingly nervous about Taiwan Semiconductor Manufacturing (TSMC) stock due to geopolitical tensions, particularly between Taiwan and China, which could impact TSMC's operations and market position [1][2]. Geopolitical Concerns - TSMC's location in Taiwan has historically deterred some investors, leading to a reversal of investment decisions by firms like Berkshire Hathaway due to fears surrounding geopolitical risks [6]. - The ongoing tensions between Taiwan and China are reminiscent of the U.S. focus on Iran, raising concerns about TSMC's stability and future [2]. Financial Performance - TSMC's stock has traded at a discount in previous years due to geopolitical fears, but its current P/E ratio of 31 is above its five-year average of 24 and close to Nvidia's earnings multiple of 36, indicating a shift in investor sentiment [7]. - In 2025, TSMC generated over $122 billion in revenue, reflecting a 32% increase from the previous year, showcasing strong financial performance despite geopolitical risks [10]. Market Position and Future Outlook - China accounted for only 9% of TSMC's revenue in 2025, with North America contributing 74%, suggesting that TSMC's strategic importance remains high despite potential threats from China [8]. - The company anticipates continued growth in 2026, providing investors with reasons to hold onto their shares rather than sell immediately [9]. - The prediction market Polymarket estimates a 16% chance of military conflict between Taiwan and China this year, indicating that the situation remains stable for TSMC [11].