In the life cycle of nearly every stock, there comes a time when the market finds itself at a crossroads, unable to decide whether the stock is a buy or a sell. Such was the case for the formidable chipmaker Taiwan Semiconductor Manufacturing (TSMC) on Thursday. Interestingly, this trading session followed closely on the heels of a major announcement from a leading player in the chip industry, which sent ripples through the market. On this day, TSMC’s stock moved sideways, mirroring the stagnant performance of the S&P 500 index.
Enter the Professional Optimists
This market indecision persisted despite a slew of largely favorable assessments from analysts regarding TSMC’s shares. Many analysts felt compelled to voice their opinions on TSMC, especially after Nvidia, the dominant force in the graphics processing unit (GPU) market and a peer of TSMC, released its second-quarter results for fiscal 2025 following the market’s close on Wednesday.
Citigroup, among others, sees potential for further gains in TSMC’s stock. In a recent analysis, the bank highlighted TSMC’s achievement in doubling its capacity for producing chip-on-a-wafer-on-substrate (CoWoS) technology. This cutting-edge “packaging” innovation is geared towards high-performance computing (HPC) and artificial intelligence (AI) applications.
The bank reaffirmed its buy recommendation for TSMC, a sentiment echoed by Bank of America. BofA’s latest report on the chipmaker indicates continued optimism, particularly due to the robust demand for AI capabilities, alongside other factors favoring the Taiwan-based company.
Setting Aside the Broader Industry Context for Now
While Nvidia’s past and projected growth is likely to bolster TSMC’s business, expectations for Nvidia’s quarter were exceptionally high. This often leads to some market participants feeling dissatisfied. Despite continued accolades from analysts, a segment of investors might remain wary of Nvidia and related stocks for a while.
