Taiwan Semiconductor Attracts Big Money on NVIDIA Chip Growth

Key Points

• A new round of investment in the United States semiconductor manufacturing chain is starting to trickle in, causing new upside themes in the sector.
• Taiwan Semiconductor stock might be at the front and center of this new move higher.
• Double-digit upside is being acknowledged by institutional capital and Wall Street analysts.

While everyone in the market is trying to figure out where the next leg of the S&P 500 is going to go, there are other unorthodox indicators in the technology sector pointing to new optimism for the future state of demand and growth in artificial intelligence, which will directly translate into more demand and future earnings in the semiconductor industry. Knowing that the bets are off, one of the most vital players in the space has made a new move.

Semiconductor darling NVIDIA Co. NASDAQ: NVDA announced it would invest hundreds of billions in the development of infrastructure in the United States to domesticate the supply chain of chipmaking. This is especially important as COVID-19 disruptions showcased how important it is not to depend on international forces for semiconductor supply. However, this is not where the center of the action will be.

Most investors focus on NVIDIA due to its popularity, but they tend to forget that there’s a much more important company supplying NVIDIA with the materials it needs to develop its chips. This is where Taiwan Semiconductor Manufacturing NYSE: TSM comes into play, as new investments in semiconductor manufacturing point to more demand from this giant chipmaker in the new United States supply chain development.

Taiwan Semiconductor’s Investment Is Key 

As geopolitical tensions between China and the United States escalate to the point of implementing embargoes on the sort of technology Asia’s powerhouse has access to, Taiwan Semiconductor’s decision to back (and expand) its presence on American soil might lead a few buyers to feel more comfortable buying the stock.

This conflict can be seen through the ban on China’s usage of lithography machinery made by ASML Holding NASDAQ: ASML, which hurt the European-based company to the point that its stock has traded lower by 26.9% over the past 12 months alone. This risk, however, is one that Taiwan Semiconductor might be able to avoid through this United States footprint.

With this in mind, investors can safely assume that a renewed sense of security in Taiwan Semiconductor stock might spur up new institutional investment backing, realizing that the importance of this stock next to the rising demand in NVIDIA will play a vital role. After announcing a combined investment of up to $165 billion in developing the semiconductor supply chain in the United States, this name is becoming all the more important to the industry.

New Investment Flows Starting for Taiwan Semiconductor Stock

This sense of renewed safety in the global semiconductor landscape has positively affected the investment flows for Taiwan Semiconductor stock recently. Investors can see that the current level of 78% of the stock’s 52-week high seemed attractive enough for some buyers to come in and back the company.

Over the past quarter, up to $9.8 billion in institutional capital has poured into Taiwan Semiconductor stock to reiterate these optimistic views for the company. Some of the recent buying was led by NorthCrest Asset Management, which decided to boost its holdings by 0.8% as of March 2025.

After that new allocation, the group now holds up to $52.9 million worth of Taiwan Semiconductor stock. While this is not the largest holding, it does serve as a bullish signal that might be taken as a potential bottoming for the stock amid the news of investment and backing from the United States semiconductor environment.

What follows from these recent developments is the potential for Wall Street analysts to come in with higher valuations in the stock and better ratings within their outlooks. As of January 2025, the most bullish outlook has been found in the ratings of Barclays analysts, who see Taiwan Semiconductor stock as Overweight alongside a $255 per share valuation target.

Based on this view, the stock would have to make a new 52-week high to potentially attract more momentum investors and rally by an implied 44.8% from where it trades today. Seeing double-digit upside potential out of a company with a $763 billion market capitalization is not a common opportunity and one investors should take advantage of.

Ultimately, there is a reason why the market as a whole is willing to pay a premium valuation for Taiwan Semiconductor stock today. Investors can see this fact through the company's price-to-book (P/B) valuation set at 8.1x, which is a steep premium to the rest of the computer sector’s 6.2x average multiple.

As the stock’s importance in the semiconductor supply chain and, therefore, the vitality of the technology sector becomes more apparent, the reasons for overpaying in this name become evident, as investors now see in the broader environment.