Taiwan Semiconductor Has a New Reason to Rally on Chip Curbs

Key Points

• President Trump has removed a ban on chips coming in an out of China, clearing the way for Taiwan Semiconductor to rally higher.
• The stock has outperformed peers and commanded a premium for a reason, there's more upside to be had.
• Wall Street analysts still see a ceiling that's double-digit upside ahead.

The state of the technology sector has been volatile, to say the least. President Trump's recent rollout of trade tariffs has spread uncertainty in the broader financial markets, making it harder for companies to implement their budget plans and new order schedules. However, a new development in these tariff rollouts might help some in the chipmaking and semiconductor industry find a new path to higher prices.

At the center of this action are the biggest and most important names in the space, as they represent a large share of the logistics and production supply chain for chips and semiconductors. With this in mind, investors should start digging in after President Trump decided to remove curbs on chips coming in and out of China, a sign of goodwill ahead of major trade talks to take place in May 2025.

That should definitely bring more willing buyers into these stocks, though there is a powerful and fundamentally rooted reason why the best candidate could be found in shares of Taiwan Semiconductor Manufacturing NYSE: TSM. As most of the other names in the space rely on this giant to get their supplies in order, this dependency will likely bring about a new path forward for the company’s outlook and future.

Price Action Confirms Taiwan Semiconductor’s Position

When investors try to gauge the market's feelings on a particular industry or stock, price action is typically the best place to start, as it represents the consensus view for the future of the name in question. Regarding Taiwan Semiconductor, investors can note that it has outperformed the broader S&P 500 by as much as 15% over the past month alone.

More importantly, it has also left behind a major peer like NVIDIA Co. NASDAQ: NVDA, which tells investors a lot more about what the future might bring for Taiwan Semiconductor stock. Even through the peak of tariff negotiations, which had turned tougher than ever on chips and semiconductors, markets still chose this stock over all others.

Leaving NVIDIA behind by as much as 10% over the month is a clear-cut sign of confidence that the company can keep outperforming NVIDIA for fundamental reasons, to say the least. With this in mind, there are other factors that investors can check on to keep driving their bullish assumptions.

A Premium Earned for Taiwan Semiconductor

When looking at the broader computer sector, investors will see that the space trades at an average price-to-book (P/B) ratio of 6.4x today. Taiwan Semiconductor stock has managed to trade up to 8.1x in terms of P/B, which has a significant impact on the market's perception of the company.

Despite value investors complaining that this makes the stock expensive and filled with downside, the reality is that the market will always overpay for the stocks it believes will outperform the peer group and the entire market. Due to Taiwan Semiconductor’s positioning in the global chip supply chain, this might be a reason to place a premium on it.

The removal of tariffs and curbs on semiconductors helps ease the uncertainty and resume chip orders and deliveries from some of the other big names in this space, like NVIDIA. However, these other players cannot manufacture their products without the basic materials that Taiwan Semiconductor provides them with, and this power stance is all investors want in this current environment.

More Sounding Boards

To confirm this theme, investors can look at some of the opinions of Wall Street analysts. As of late April 2025, those from Susquehanna decided to reiterate a Positive rating for the company, even though uncertainty was at its peak regarding the sector’s future performance and demand.

More than that, around the same time, analysts from Needham & Co. also kept their Buy rating on Taiwan Semiconductor stock, this time boosting their valuations to $225 per share. Considering today’s prices, this valuation calls for up to a 26% upside in the stock.

With Taiwan Semiconductor shares trading at only 76% of their 52-week highs, this perceived upside now suggests that the risk-to-reward scale favors the buyers, as most of the downside potential has already been priced into the company.

When the tariff deals are inevitably reached, Taiwan Semiconductor will likely continue leading the industry.