Taiwan Semiconductor Stock Is The Gift That Keeps on Giving

Key Points

• Taiwan Semiconductor stock has proven itself to be one of the safer names in the semiconductor and chipmaking industry.
• Compared to other names, its lower volatility and price action show it can have further upside ahead.
• Institutional buyers see this upside in place, so they've bought more of the stock recently.

Most investors in the technology sector have had to deal with the volatility born out of President Trump's recent trade tariffs. These tariffs were rolled out against some of the United States’ biggest trading partners, centered on China and other Asian regions. This targeting matters because this region is the most responsible for providing the global supply chain for semiconductors and chips used in everyday products and services.

This volatility has shaken out some of the biggest and most important names in this industry, swaying the risk-to-reward ratios in a direction that leaves most participants unsure of where they can be safe, if anywhere.

In times like these, keeping exposures focused on solid fundamental themes that show themselves in the price action itself is key, though that is a very broad definition of what needs to be done.

Zooming into details, market share and pricing power should be at the top of the list of factors that justify a position, with most of everything else concerning defensive price behavior.

This is where shares of Taiwan Semiconductor Manufacturing NYSE: TSM come into play, showing investors why it should be the first pick of the litter, especially compared to other big names in the space.

TSM Outshines NVIDIA?

It is somewhat obvious that NVIDIA Co. NASDAQ: NVDA is regarded as the king of the semiconductor and chipmaking industry since it has earned most of the market’s attention and price action subsequently. However, NVIDIA is the middleman between what it takes to make industry-leading semiconductors and selling these finished products to customers who need them.

Before NVIDIA, higher up in the value chain is Taiwan Semiconductor, which has earned itself a prominent spot at the top of the semiconductor equipment manufacturing space, whose technology and raw materials allow companies like NVIDIA to produce the powerful chips that have brought it to fame.

In that sense, there wouldn’t be a NVIDIA without Taiwan Semiconductor, giving the latter a much more important place in the market without having all the attention and volatility that the “King” NVIDIA calls on itself. On a technical basis, this theme shows up in beta, a mathematical measure of a stock’s volatility relative to a benchmark like the S&P 500 index.

To get specific, Taiwan Semiconductor stock has a beta of 1.3x, which is significantly below NVIDIA stock’s beta of 2.1x. Moving forward, this means that NVIDIA shareholders will likely see their portfolio values swing more aggressively, which is never a desirable situation, especially when the broader market is already as volatile as it is today.

TSM Price Action Shows Preference for Safety

This doesn’t mean investors should distrust their positions in NVIDIA, but they should be aware that volatility is more prevalent in this name than Taiwan Semiconductor stock. Following this idea, investors can also see that one stock outperformed the other over the past month, showing the market’s preference for safety rather than speculation today.

Taiwan Semiconductor stock left NVIDIA behind by just over 3% on the month, which shouldn’t have been the case on a technical basis, considering that a higher beta works in favor of an uptrend to deliver outsized returns. Given that NVIDIA couldn’t beat Taiwan Semiconductor stock on an up-trending month, it’s somewhat safe to assume that the market prefers Taiwan Semiconductor’s safety.

This preference is not only rooted in the technical volatility standpoint, but likely also focused on the fundamental fact that the company is directly tied to any success that NVIDIA might report, given that it is one of the main suppliers of the raw materials necessary to produce chips.

At the same time, it isn’t just NVIDIA that supports Taiwan Semiconductor’s position in the industry, but also other major names in the United States market, such as Apple Inc. NASDAQ: AAPL and others in the consumer electronics corner of the economy.

The final checkpoint for investors to confirm this preference is a more recent development through reported institutional buying activity. As of mid-May 2025, allocators from Price T Rowe Associates decided to boost their holdings in Taiwan Semiconductor stock by as much as 19.1%, bringing their net position to a high of $2 billion today, another sign of confidence and preference for the company moving forward in this volatile market.