TSMC Shares Weather Regulatory Storm as AI Growth Momentum Continues

Despite facing new regulatory headwinds from the United States, Taiwan Semiconductor Manufacturing Company (TSMC) is demonstrating remarkable resilience. The recent revocation of expedited licensing for equipment imports to its Nanjing facility in China initially rattled investors, but the chipmaker’s shares have shown surprising strength, prompting questions about what’s driving this stability beyond mere optimism.

Strong Fundamentals Outweigh Limited Nanjing Impact

The revoked export licenses affect TSMC’s manufacturing operations in Nanjing, which represents a relatively minor component of the company’s overall production capacity. According to analysis from Macquarie Group, the Nanjing facility accounts for just 3% of TSMC’s total capacity and primarily focuses on producing less profitable 16nm and 28nm chips.

While experts acknowledge potential equipment shortages could emerge within months if licensing procedures face delays, Morningstar’s Phelix Lee identifies potential solutions. TSMC could potentially redirect equipment from other planned facilities and stockpile replacement parts ahead of the December deadline.

Share Performance Defies Regulatory Concerns

Contrary to what might be expected given regulatory setbacks, TSMC’s stock has displayed notable strength in trading. The shares advanced 1.47% to reach $246.98, outperforming even the S&P 500’s movement on the same day.

This performance extends a year-to-date gain exceeding 23%, underscoring sustained investor confidence in the company’s fundamental, AI-driven growth narrative. Foreign institutional investors have been particularly active, purchasing Taiwanese equities worth NT$146.2 billion, with TSMC standing as one of their primary targets.

Should investors sell immediately? Or is it worth buying TSMC?

Artificial Intelligence Fuels Extraordinary Growth

TSMC’s business fundamentals remain exceptionally robust. The company reported spectacular second-quarter 2025 results, with revenue climbing 44% to reach $30.07 billion while earnings per share surged 61% to $2.47.

Key growth catalysts include:
– AI-related revenue tripled during 2024 and is projected to double again in 2025
– Market share increased to 70.2% (up from 67.6% in the previous quarter)
– Technology leadership in 3nm and upcoming 2nm processors
– Major clients including NVIDIA, Apple, and Broadcom continue to increase orders

Analyst Confidence Remains Unshaken

Financial analysts maintain their positive outlook despite near-term regulatory uncertainties. Zacks Investment Research forecasts annual earnings of $9.83 per share alongside revenue of $122.4 billion.

The average analyst price target currently stands at $241.69, with Bernstein recently raising its target from $249 to $290. Trading at a forward price-to-earnings ratio of approximately 24.77, the valuation appears reasonable given the company’s exceptional growth prospects.