Taiwan Semiconductor Could Boom on This AI Action Plan

Key Points

• The new AI Action Plan rolled out in the United States could act as a major tailwind in the world of chipmakers like Taiwan Semiconductor Manufacturing.
• With fundamental implications pointing to financial growth and higher prices ahead, investors should pay attention.
• Wall Street sees double-digit upside, and chances are this is only the beginning.

The world of technology stocks has become somewhat of the Wild West in the stock market, with new artificial intelligence companies constantly emerging in this ongoing race for dominance and adoption. Meanwhile, larger, more established players are taking over the supply and market share of the world’s leading chipmaking and semiconductor technologies.

Of course, there is one broader agenda at play in this proverbial “gold rush,” and that is that the United States is now in direct competition with China in this new artificial intelligence race. That is why President Trump has recently introduced America’s AI Action Plan, a bill that has just introduced a massive tailwind for all names involved in this value chain.

With new funding allocated to data center infrastructure, enabling greater global artificial intelligence development and capacity sharing, it is now time for investors to seriously consider a company like Taiwan Semiconductor Manufacturing NYSE: TSM as a key player in supporting this data center expansion and the future onshoring of semiconductor and chip manufacturing within the United States.

A Key Pivot on Chinese Negotiations

One of the most concerning aspects of the current chip and artificial intelligence race is the United States' position relative to China, as past trade tariff negotiations seemed to focus heavily on this industry and China’s ability to import certain chips, such as those from NVIDIA Corporation NASDAQ: NVDA.

However, in this new AI Action Plan, President Trump has permitted China to import NVIDIA chips. This sudden shift unexpectedly favors Taiwan Semiconductor more than NVIDIA, despite what may seem like a controversy. The reason is that NVIDIA relies on Taiwan Semiconductor for its manufacturing and wafer equipment.

As China is also aggressively developing its artificial intelligence and data center footprint, this freedom in the AI Action Plan could represent a massive tailwind for Taiwan Semiconductor stock, which might be why the market has sent the name up to a new 52-week high, not to mention delivering a net rally of up to 48.5% over the past quarter alone.

More Upside to Be Priced In

Despite this recent bullish price action, there still seems to be a lot of momentum left in the stock. Fundamentally, investors could argue that an even higher ceiling could be reached in the coming months. Another section of this action plan finds the reasoning behind this new potential ceiling.

Focusing on exports and artificial intelligence deregulation, the following sections of this plan accelerate how business in the artificial intelligence world used to be done. This opens up the floodgates for faster model development, demand for more advanced chips, and, of course, a fast pass to data center volume.

With this in mind, the graphics processing units (GPUs) enable this to happen in the first place, and most of the industry obtains them from NVIDIA itself. Remembering that no NVIDIA is without Taiwan Semiconductor will help investors connect the dots in the current industry scene.

And investors aren’t the only ones connecting the dots. Wall Street analysts seem to be already getting behind this theme for semiconductor names, with a particular interest in Taiwan Semiconductor stock. Charles Shi from Needham & Company is one of the leading analysts to share his optimism as of mid-July 2025.

With a new Buy rating on Taiwan Semiconductor stock, alongside a valuation target of $270 per share, Shi has now placed the highest valuation on this company out of his peer group, calling for not only a new 52-week high to be made but also implying that Taiwan Semiconductor stock could deliver up to 10.2% upside from where it trades today.

Of course, this price target was already set before the action plan was introduced, so chances are a new analyst rating (likely with a higher valuation) will trickle in shortly. However, at that time, the stock might react so quickly to the news that it renders the announcement worthless.

In other words, there is a window of opportunity in Taiwan Semiconductor stock that is quickly closing, and the serious intent behind this new plan could be only the beginning of an additional series of measures to ensure the United States stays ahead in the artificial intelligence race, where Taiwan Semiconductor plays a vital role.