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Taiwan Semiconductor stock forecast: Is TSM the best semiconductor play?

By Nicole Willing

Edited by Valerie Medleva


Updated

In this photo illustration the Taiwan Semiconductor Manufacturing Company (TSMC) logo is displayed on a smartphone.
Taiwan Semiconductor Manufacturing Company (TSMC) is the world’s largest semiconductor foundry. – Photo: Shutterstock

The world’s largest semiconductor foundry, Taiwan Semiconductor Manufacturing Company (TSMC), is at the centre of a shift in the semiconductor market as the industry looks to build new capacity in geographically diverse regions.

At the end of December 2022, the company started production of a new generation of advanced semiconductor chips, having expanded the capacity at its factory in Taiwan. It is also building additional capacity in Taiwan, Japan and in Arizona in the US.

The TSM stock price has rebounded from its 52-week low reached in November, but remains down by around 42% over the past year as technology stocks have come under pressure from bearish stock market sentiment.

What are the prospects for the stock in 2023? Will the share price make further gains or turn lower?

What is TSMC?

TSMC was established in 1987 by former Texas Instruments executive Morris Chang as the world's first dedicated semiconductor chip foundry. It has grown to become one of the largest companies in Taiwan. TSMC produces chips for the likes of AMD (AMD), Nvidia (NVDA), Broadcom (AVGO) and Apple (AAPL), as well as companies that also produce their own chips, like Intel (INTC), NXP (NXPI) and Texas Instruments (TXN).

TSMC listed on the Taiwan Stock Exchange in 1993. In 1997, it became the first Taiwanese company to be listed on the New York Stock Exchange (NYSE).

In 2021, the company had an annual production capacity of more than 13m 12-inch equivalent wafers, produced across its plants in Taiwan, China and the US. TSMC is due to complete its new plants in Japan and the US in 2024.

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TSMC share price bounces up from lows

The TSM stock price reached an all-time closing high of NT$672 a share on the Taiwan Stock Exchange and $140.66 per share on the New York Stock Exchange on 14 January. That was up by more than 200% since March 2020 at the start of Covid-19 lockdowns. The company benefited from a strong demand cycle and supply chain constraints for semiconductors in automotive, consumer devices, data centres and other applications.

NYSE-listed TSM share price chart

However, as economies around the world slowed in 2022, supply chains became oversupplied and inventories have built up. With technology stocks under pressure in 2022 and expectations rising that major economies will face recession in 2023, TSMC’s share price has not been immune to decline.

The stock trended lower to reach $75.56 on the NYSE and $435.50 on the TSE in early July, but then moved up to $91.57 and NT$527 in mid-August, buoyed by optimism that the US Federal Reserve (Fed) would slow the pace of interest rate hikes that have weighed on financial markets.

However, subsequent high inflation readings indicated that interest rate hikes could continue, and the TSMC share price on the NYSE fell to $60.28 on 3 November. With stocks moving off the lows, the share price rose to $82.98 on 30 November. 

On the TSE, the stock bottomed out at NT$371 on 25 October and rose to NT$498.50 on 1 December. The gains moderated in December, and TSMC ended 2022 at $74.49 a share on the US market and NT$448.50 on the TSE.

For the third quarter ended 30 September, TSMC announced revenues of NT$613.14bn, a 47.9% year-on-year increase and a 79.7% jump in net income to NT$280.87bn. 

“Our third quarter business was supported by strong demand for our industry-leading 5nm technologies,” said TSMC’s Wendell Huang, vice president and CFO. 

“Moving into fourth quarter 2022, we expect our business to be flattish, as the end market demand weakens, and customers’ ongoing inventory adjustment is balanced by continued ramp-up for our industry-leading 5nm technologies.”

 

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In US dollar terms, third-quarter revenue increased by 35.9% year on year to $20.23bn. The company expects its fourth-quarter revenue to range between $19.9bn and $20.7bn, with an operating profit margin between 49% and 51%.

On 6 December, TSMC announced a significant expansion to its investment in Arizona, adding a second fabrication plant. The company now expects to invest $40bn in the site, up from the $12bn it announced in 2020. 

What is the outlook for the share price for the new year? 

Below, we look at some of the latest Taiwan Semiconductor stock predictions from analysts.

Taiwan Semiconductor stock forecast: Will the share price recover in 2023?

The average 12-month price target for TSMC’s US shares from nine Wall Street analysts that have issued a Taiwan Semiconductor stock forecast was $116.57 a share at the time of writing, according to data compiled by MarketBeat. Estimates ranged between $75 at the low end and a high of $170.

Analysis by Singapore-based OCBC on 24 November estimated fair value for the NYSE-listed stock at $118. According to the bank’s TSM stock forecast: “Despite near-term headwinds from an inventory glut and weakening end-demand in the semiconductor industry, we believe the business should be relatively resilient on the back of relatively higher priced 3nm wafer production by the end of FY22 and from its customers gaining share in leading-edge market.” 

“While the length and magnitude of an industry downturn is unknown, we believe that TSMC should be able to maintain foundry leadership, while revenue and earnings CAGRs should trend at high-single digits to low teens over the longer term.” 

 

For the Taiwan-listed stock, analysts at Daiwa Capital Markets reiterated their buy rating on 22 December, with a Taiwan Semiconductor share price forecast of NT$655 per share indicating an upside of 40.4%.

“We believe TSMC will be counter-cyclical in terms of YoY revenue growth, navigating well through the 2023 chip correction while enjoying a lift in structural profitability above its pre-Covid level on value redistribution to the upstream of the supply chain,” the analysts wrote in a note to clients. 

“This, together with attractive valuations, makes the stock a bargain for value investors, in our view. We reaffirm our Buy (1) call and continue to position TSMC as one of our conviction-Buys for 2023 post our upgrade in September.”

 

Analysts at J.P. Morgan have a similar Taiwan Semiconductor stock forecast for 2023 of NT$650 per share, based on 15 times the company’s 12-month earnings per share, “slightly lower than the 10-year average multiple of 16x due to the ongoing semiconductor industry downturn cycle”, according to a research note on 7 December.

Back in October, the Taiwan Semiconductor stock forecast from Morningstar analyst Phelix Lee suggested that TSMC shares were undervalued based on the potential for long-term computing growth, despite an uncertain 24 months ahead.

For the longer term, the Taiwan Semiconductor stock forecast for 2025 for TSMC’s US-listed stock from algorithm-based forecaster Wallet Investor projected that the share price could rise to $126.719 by the end of the year, up from $90.89 at the end of 2023.

Are you looking to invest in or trade TSMC’s shares based on TSM stock forecasts? Remember that financial markets are very volatile, and analysts and algorithm-based forecasters can and do get their predictions wrong. 

It is crucial that you always do your own research. Look at the latest market trends, news, technical and fundamental analysis, and expert opinion before making any investment decision. Keep in mind that past performance is no guarantee of future returns. And never invest money you cannot afford to lose.

FAQs

Is Taiwan Semiconductor a good stock to buy?

Whether TSMC is a good stock for your portfolio depends on your risk tolerance, portfolio composition and investing strategy. Always do your own research. Remember that past performance is no guarantee of future success.

Will Taiwan Semiconductor stock go up or down?

The direction of the TSMC share price will likely depend on the macroeconomic environment, market sentiment, and future demand for semiconductors, among other factors.

Should I invest in Taiwan Semiconductor stock?

Whether you should invest in TSMC is a personal decision only you can make depending on your personal circumstances. You should do your own research to come up with an informed view of the stock. Remember that past performance is no guarantee of future success. And never invest money you cannot afford to lose.

Markets in this article

AMD
Advanced Micro Devices Inc (Extended Hours)
154.86 USD
-4.74 -2.960%
AAPL
Apple Inc (Extended Hours)
224.64 USD
-4.06 -1.770%
NVDA
NVIDIA Corp (Extended Hours)
120.48 USD
3.02 +2.570%
AVGO
Broadcom
156.44 USD
0.82 +0.530%

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