Cathie Wood Just Bought a New Stake in Taiwan Semiconductor Stock

Key Points

• Cathie Wood just bought a new stake in Taiwan Semiconductor stock, driving interest in the company's future potential.
• Investors can now connect the dots in the ways that the company can keep breaking new ceilings today.
• More institutions have joined the party, it seems, creating a consensus for bullishness.

When investors look around for a new idea to trade or invest in, there are often lean seasons where nothing seems to click or make sense, and no opportunities are to be found, while other seasons' ideas just seem to come from everywhere at once.

In today’s market, it’s difficult to identify a good value opportunity considering that the broader S&P 500 index is trading near its all-time highs now.

However, this is where keeping track of what the so-called “smart money” is buying or selling can be useful. Seeing what the bigger players in the market are doing can spark new ideas for investors to consider if they can successfully reverse-engineer the thinking or the thesis behind these moves by institutional investors.

This means making it part of their portfolio and understanding what might drive performance and risk.

By insourcing an idea into an individual process, investors can better understand what may drive profits and what may bring on losses instead of relying on someone else’s homework.

Today’s homework can be taken from Cathie Wood, as she recently decided to buy up a significant stake in shares of Taiwan Semiconductor Manufacturing NYSE: TSM, and there must be a good reason for that.

Critical Role in the Chip Supply Chain Justifies Cathie Wood’s Strategic Bet

Before investors understand why Cathie Wood’s fund decided to buy up a position in Taiwan Semiconductor, they need to understand the company’s role in today’s market developments. With the recent volatility around the technology sector caused by President Trump's trade tariffs, a few things must be considered.

Some businesses have delayed new orders for equipment and products coming out of China, which will likely slow down the demand for chips and semiconductors, essential in a large share of imports today. 

However, an agreement has been reached between the United States and China, pushing for a 90-day pause on tariffs centered on clearing the way for semiconductors as a priority.

This might get things moving in the right direction for a major company like Taiwan Semiconductor, relieving some of the uncertainty and pressures off future financials. However, another factor to consider here is that this company is essential in most (if not all) of the chip supply chain.

Most investors would focus on a name like NVIDIA Co. NASDAQ: NVDA as one of the most popular ones in this group, given that it has attracted the most price action over the recent months and years. However, some would fail to realize that there wouldn’t be any NVIDIA without the technology and equipment that Taiwan Semiconductor makes.

That’s not only true for NVIDIA; plenty of other names in the consumer electronics space indirectly rely on Taiwan Semiconductor in this manner.

That being said, Cathie Wood and her team may have considered this positioning when opening their new position.

Institutional Confidence, Short Seller Retreat Fuel Bullish Outlook for Taiwan Semiconductor

As tariff uncertainty will likely subside in the coming months and quarters, investors can safely assume that Taiwan Semiconductor will start to see the same level of new orders and bookings as it typically does under a typical environment.

Seeing the stock trade at 85% of its 52-week high, and delivering a monthly rally of up to 29.6%, the consensus might be pricing in a few better quarters down the road, justifying the decision to buy in recent days, but the optimism seems to run a bit deeper than that.

Short sellers now realize that Taiwan Semiconductor’s risk-to-reward ratio looks a bit too focused on the upside, especially with room to flirt again with new 52-week highs. For this reason, and given the industry's fundamental setup today, investors can see that up to 15.5% of the company’s short interest declined over the past month alone.

Witnessing the bears leave in a sign of capitulation, today’s buyers of Taiwan Semiconductor stock might still see a more straightforward path ahead for higher prices. When scanning for more recent institutional buying, investors can start to conclude that it undeniably helps a bull case in the stock.

As of May 2025, those from AllianceBernstein also built up a stake worth up to $1.5 billion after a recent boost of 31.5%, signaling further institutional confidence that runs deeper than just Cathie Wood’s fund. This is another big pillar of strength for new investors still on the fence to consider.