TSMC Shows Market Rally Amid Regulatory Risks and Technical Caution; Analysts Maintain Buy Outlook

Technical Analysis

Taiwan Semiconductor Manufacturing Company Limited (TSM) recently experienced a market rally, closing at $158.75 on April 9, 2025, with a significant gain of 12.29% during the day. Despite this, TSM currently trades below its 50-day and 200-day moving averages ($183.47 and $184.50, respectively), indicating a bearish longer-term trend. The RSI14 at 37 suggests that the stock is close to oversold territory, which may prompt a short-term reversal. The MACD at -4.08 is negative, typically signaling downward momentum. The stock's average true range (ATR) of 5.82 indicates moderate volatility.

Fundamental Analysis

For the first quarter, TSMC's impressive revenue of $25.55 billion surpassed market expectations, driven by strong demand for artificial intelligence applications. This reflects robust operational performance. However, the potential $1 billion fine due to an investigation into export control violations introduces regulatory risk and could impact earnings. The PE ratio of 23.21 suggests a moderate valuation compared to the tech sector, while the DCF value of $109.92 highlights that the stock is currently trading above its intrinsic value estimate. The trailing twelve months (TTM) dividend yield stands at 1.24%, providing moderate income for investors.

Short-term Outlook

For the next trading day, market sentiment may remain volatile due to external factors like the U.S. investigation, but strong earnings could provide support. The immediate resistance level is at $172.97, and should positive momentum continue, the stock may test this level in the coming sessions. Support is observed at $146.80. Over the next week, investors should watch for the implications of the earnings announcement on April 17, 2025, and the potential impact of U.S. regulatory actions.

Intrinsic Value and Long-term Investment Potential

While TSMC's market-leading position and dominance in the semiconductor industry present a compelling long-term narrative, the current price appears elevated relative to intrinsic value. The stock's robust fundamentals, coupled with broad market share in advanced chip technology and favorable AI trends, suggest strong growth potential. However, geopolitical tensions and regulatory risks could potentially impact operations and valuation metrics. Analysts appear optimistic with a consensus "Buy" and a target median price of $200, reflecting confidence in TSMC's growth trajectory.

Overall Evaluation

TSM appears to merit a 'Hold' assessment for now. Despite recent price recovery and positive quarterly results, the stock's technical indicators suggest caution, given the existing downside pressures. Long-term investors might consider waiting for more favorable entry points, particularly if regulatory issues dramatically impact near-term financial outcomes. The stock's future remains promising, contingent on navigating external challenges and sustaining operational excellence in emerging markets like AI.