While shares of Taiwan Semiconductor Manufacturing Company (TSMC) faced selling pressure on Monday, declining approximately 2%, a critical development is unfolding behind the scenes. The world’s largest semiconductor foundry may be nearing a pivotal resolution in its trade-related challenges with the United States. According to Taiwan’s chief trade negotiator, Yang Jen-ni, an agreement to avoid double tariff imposition is now considered “highly probable.” This breakthrough would provide significant relief for TSMC’s intricate global supply chain, raising the question of whether this positive development can reverse the current market correction.
Strong Fundamentals Contrast with Short-Term Selling
The day’s market activity presented a paradox. TSMC’s shares fell 2.08% to 1,410 New Taiwan dollars in Taipei, while its American Depositary Receipts (ADRs) dipped to around $286 in New York. This movement was largely driven by foreign institutional investors, who executed a net withdrawal of NT$24.35 billion from the Taiwanese market. Concerns over a potential “AI bubble” and widespread profit-taking across the technology sector were cited as key reasons.
This short-term sentiment, however, stands in stark contrast to the company’s robust operational outlook and market position:
- 2025 Revenue Growth: TSMC anticipates growth of roughly 35%, fueled by demand for AI and high-performance computing chips.
- Market Dominance: The firm commands over 70% of the global foundry market, holding a near-monopoly on the most advanced manufacturing processes.
- Technology Roadmap: Mass production of its 2-nanometer node is scheduled for 2025, promising a 15% performance boost or a 25-30% reduction in power consumption.
- Pricing Power: The company plans to increase prices by 5-10% for its most advanced chips starting in late 2025.
Impending U.S.-Taiwan Deal Would Remove a Major Overhang
The most significant near-term catalyst stems from trade negotiations. Officials from Taipei indicate that a formal agreement with the U.S. could be finalized before the year’s end. This deal would specifically address “tariff-stacking,” a situation where the 20% U.S. duties imposed in August 2025 also apply to chips further processed in third countries.
For TSMC, this is far from symbolic. The company is investing $65 billion in its fabrication plants in Arizona and depends on seamless logistics between the U.S., Taiwan, and other global sites. Eliminating this tariff burden would not only reduce costs but also substantially lower the investment risk associated with its substantial U.S. expansion.
Should investors sell immediately? Or is it worth buying TSMC?
The Compelling Valuation Gap in the AI Era
A notable valuation discrepancy exists within the semiconductor ecosystem. While Nvidia trades at a forward price-to-earnings ratio of approximately 27, TSMC’s shares are valued at around 22. This gap persists even though TSMC manufactures chips for Nvidia, AMD, Broadcom, and numerous other designers. An estimated 80% of Nvidia’s data center chips are produced by TSMC.
This strategic position as the essential “picks and shovels” provider during the AI boom offers a unique form of diversification. With global data center investments projected to reach up to $6.7 trillion over the next five years, TSMC is positioned at the very source of this capital expenditure, regardless of which specific AI architecture ultimately prevails.
The Path Forward
Technically, the stock is currently testing a key support level near $286. The formal announcement of the trade agreement, expected in December, will be a crucial catalyst. Should the tariff relief materialize, a substantial overhang on the stock would be removed, securing the economics of the Arizona investment.
Despite the day’s weakness, analyst sentiment remains overwhelmingly positive. The confirmed pricing power for its upcoming 2nm technology signals robust profit margins extending into 2026. The central question for investors is not TSMC’s ability to execute, but rather when the market will fully price in the positive implications of a tariff breakthrough.
Ad
TSMC Stock: Buy or Sell?! New TSMC Analysis from December 1 delivers the answer:
The latest TSMC figures speak for themselves: Urgent action needed for TSMC investors. Is it worth buying or should you sell? Find out what to do now in the current free analysis from December 1.
TSMC: Buy or sell? Read more here...
