Taiwan Semiconductor Manufacturing Shares Jump on Positive AI Outlook. Is It Time to Buy the Stock?

Taiwan Semiconductor Manufacturing Company (TSMC) shares surged on Thursday, January 16, 2025, following the release of its fourth-quarter earnings report. The company reported a 57% year-over-year increase in net profit and a 39% increase in revenue, driven by strong demand for advanced chips used in artificial intelligence (AI) applications. TSMC's shares rose by 3.9% on the day, adding to their impressive 81% gain in 2024.



TSMC's CEO, C.C. Wei, stated that the company's business in the fourth quarter was supported by strong demand for its industry-leading 3nm and 5nm technologies. He also noted that the company expects its business to be impacted by smartphone seasonality in the first quarter of 2025, partially offset by continued growth in AI-related demand. TSMC guided for mid-20% growth in sales this year and expects first-quarter revenue to be between $25.0 billion and $25.8 billion.



Analysts have been bullish on TSMC's prospects, with an average target price of $232.5, predicting an increase of 9.93% from the current stock price of $211.50. The average target price suggests that analysts expect TSMC's stock to continue to rise in the near future.

However, TSMC faces some headwinds in the form of U.S. export controls on China and uncertainty surrounding the trade policy of President-elect Donald Trump. These challenges could potentially impact TSMC's business, but the company has been able to manage these challenges effectively so far. TSMC's diversified client base, advanced technologies, and expansion into new markets help mitigate potential risks and maintain the company's strong position in the semiconductor industry.

In conclusion, TSMC's strong AI-related demand and positive outlook make it an attractive investment opportunity. The company's guidance for mid-20% growth in sales this year and analysts' bullish predictions suggest that TSMC's stock is likely to continue to rise in the near future. However, investors should be aware of the potential challenges posed by U.S. export controls on China and geopolitical tensions. As always, it is essential to conduct thorough research and consider your risk tolerance before making any investment decisions.