TSMC Shares Garner Bullish Analyst Support Following Sector Dip

TSMC US8740391003

A prominent research platform has upgraded its rating on Taiwan Semiconductor Manufacturing Company (TSMC), suggesting a disconnect between recent share price volatility and the firm's solid operational performance. This move comes after the chipmaker's stock experienced a notable decline at the end of last week.

Wall Street Zen has revised its stance on TSMC from "Hold" to "Buy." The analysts point to the company's entrenched leadership in supplying the artificial intelligence boom, arguing that the stock's recent weakness does not align with its business fundamentals. They highlight a consensus average price target of approximately $355, which implies a potential upside of roughly 21% from Friday's closing level.

The upgrade report emphasizes TSMC's continued dominance in advanced chip manufacturing and packaging technologies. It contends that robust demand for AI accelerators should support higher valuations, even after the stock's recent pullback. On Friday, TSMC shares fell about 4.3% amid broader sector weakness.

Capacity Expansion Targets AI Supply Chain

Central to the optimistic assessment is TSMC's aggressive build-out of its CoWoS (Chip-on-Wafer-on-Substrate) packaging capacity. This technology is critical for producing high-performance AI chips. Current industry estimates place monthly CoWoS capacity between 75,000 and 80,000 wafers. TSMC plans to increase this to 120,000–130,000 wafers per month by the end of 2026.

These investments directly address a key bottleneck in the AI supply chain: the availability of high-performance accelerators for clients like Nvidia. Successfully easing this constraint would strengthen TSMC's pricing power and, in the analysts' view, support improved margins and valuation multiples.

Additional context comes from a Smartkarma analysis published Sunday. It notes that TSMC continues to trade at a premium of about 26% compared to rivals such as United Microelectronics Corporation (UMC). While some arbitrage models consider this spread ambitious, it reflects the market's view that TSMC's leading 3-nanometer and future 2-nanometer processes distinctly separate it from conventional foundries.

Strong Fundamentals Amid Technical Correction

The rating change also provides perspective on the latest price action. Friday's drop followed profit-taking across the semiconductor sector, despite TSMC reporting strong November revenue figures. The company posted monthly revenue of NT$343.61 billion (approximately US$11 billion), a 24.5% increase year-over-year.

Sequentially, revenue declined by 6.5% from October's record high, a seasonal dip that was widely anticipated. This does not alter the broader positive trend: cumulative revenue for the year to date remains 32.8% higher than the previous year. Many observers therefore interpret the share price decline as a technical correction from overbought levels rather than a signal of deteriorating fundamentals.

For reference, TSMC's share price closed at €249.00 on Friday, marking a daily loss of 4.23%. Despite this, the stock has gained over 36% in the past twelve months and remains well above its 200-day moving average.

Market Position and Forward Trajectory

TSMC maintains its role as the essential manufacturing partner for building global AI infrastructure. While competitors grapple with yield challenges in advanced nodes, TSMC is progressing with its 2-nanometer technology, slated for mass production in 2026. This solidifies its technological lead and underpins optimistic earnings forecasts.

Recent reports also show a nuanced picture among investors. Asset managers are reportedly continuing to build their positions, while shorter-term traders used Friday's dip to realize profits. Concurrently, profit and investment forecasts for 2026 and beyond are being revised upward—an indication that the market views heavy AI-related capital expenditure as an opportunity rather than a risk.

As the new trading week begins, technical levels come into focus. From a U.S. dollar perspective, key markers include support around $290 and the 50-day moving average near $293, which serves as a pivotal short-term level. A swift rebound above this zone would support the upgrade thesis, whereas sustained trading below it could signal a test of lower levels. However, fundamental drivers like AI capacity expansion and strong sales growth remain clearly positive, forming the basis for the newly issued buy recommendation.