TSMC Analysis: Strong Buy Signal Amid Overbought Conditions and Promising Growth Prospects

Technical Analysis

TSMC closed at $176.52 on May 9, 2025, up 0.74%. The intraday range showed a high of $180.46 against a low near the close at $176.50, indicating upward price pressure approaching key resistance at $180. The 14-day RSI at 81 signals overbought conditions, suggesting potential near-term consolidation or pullback. The MACD remains positive at 3.58, consistent with a strong bullish trend. The 50-day moving average ($167.87) sits well below the current price, reinforcing near-term support, whereas the 200-day moving average ($182.97) remains overhead resistance, limiting immediate breakout scope. Average volume (17.78 million) exceeds recent trading volume (10.11 million), pointing to reduced momentum and potential volatility contraction. The ATR of $3.60 suggests a moderate daily price range ahead. Support is identified at $172.97 and a stop-loss near $169.74 offers a technical risk threshold.

For the next trading day (May 12), momentum may remain positive but overbought RSI hints at a likely short-term pause or minor retracement just below resistance. Over the upcoming week, the stock is expected to trade in a range between $172.97 and $180, awaiting catalyst-driven volume to break above the 200-day moving average toward its yearly high of $226.40.

Fundamental Analysis

TSMC’s trailing twelve months EPS stands at $8.55, with a P/E ratio of 21.80, reflective of reasonable valuation for a semiconductor leader given growth prospects. The market capitalization of approximately $967 billion labels TSMC a mega-cap tech titan with strong competitive moats in advanced chip manufacturing. The dividend yield at 1.11% (TTM basis) offers a modest income component, highlighting the company’s balance between growth and shareholder returns.

Recent news underscores TSMC’s robust sales momentum, driven by surging demand linked to AI server and processor shipments expected to double revenue in 2025. Despite currency headwinds from a 9% appreciation of the Taiwanese dollar impacting USD revenue translation, its industry dominance and operational efficiency should sustain profit margins. Market tariffs and geopolitical uncertainties present risk factors but have yet to materially impair the company’s growth trajectory.

Analyst consensus strongly favors a “Buy” stance, with a unanimous price target of $215 indicating a near 22% upside from current levels. Earnings results expected on July 17 and dividends slated for July 10 will be critical events for re-evaluating valuation and investor sentiment.

Intrinsic Value and Long-Term Potential

Using current earnings and growth indicators, TSMC’s intrinsic value likely exceeds the present market price assuming sustained AI-driven demand and continued technology leadership. P/E near 22 is justified by high margins, production scalability, and innovation in chip fabrication. The company’s core position in the semiconductor supply chain and ongoing investments in advanced node technologies underpin long-term earnings visibility. Macroeconomic factors such as chip industry cycles, international trade policies, and foreign exchange risks remain variables, but the company’s resilience and strategic positioning favor appreciation over a multi-year horizon.

Overall Evaluation

TSMC is categorized as a Buy candidate. The strong technical momentum tempered by short-term overbought conditions suggests cautious near-term price stability, while solid fundamentals, a positive industry outlook driven by AI expansion, and supportive analyst consensus justify a bullish medium- to long-term outlook. The stock is attractively valued given its dominant market share, growth catalysts, and robust financial metrics, providing a margin of safety against headwinds while also offering meaningful upside potential toward the $215 target level within the next several months.