TSMC’s Strategic Position Amidst AI Demand and Geopolitical Crosscurrents

Strong year-end export figures from Taiwan have provided a significant tailwind for Taiwan Semiconductor Manufacturing Company (TSMC), reinforcing the thesis of a sustained artificial intelligence supercycle. This momentum persists even as new scrutiny emerges over the chipmaker's costly expansion plans in Arizona. The central question for investors is whether the current growth pace, driven by AI chip demand, can continue to outweigh mounting geopolitical and operational headwinds.

The immediate catalyst for optimism was Taiwan's Ministry of Economic Affairs releasing November export order data. Orders surged by 39.5% year-over-year to $72.92 billion, substantially exceeding market forecasts. Crucially, this growth was almost entirely attributable to demand for AI and high-performance computing (HPC) semiconductors. This data point confirms that infrastructure build-out for major clients like Nvidia and AMD is not slowing but accelerating. For TSMC, the world's leading contract manufacturer, these export orders serve as a leading indicator for future revenue.

Supporting this narrative, market research from Counterpoint Research published in mid-December shows TSMC achieved a record 72% share of the global foundry market in the third quarter of 2025. The firm dominates the supply chain for AI accelerators, particularly at the most advanced process nodes of 5 nanometers and smaller. This gives TSMC de facto control over the core of the AI logic market.

Operational and Strategic Headwinds

The landscape, however, is not without challenges. A recent report from the New York Times highlights persistent issues at TSMC's U.S. expansion site in Arizona, citing permitting delays and a shortage of skilled labor that are driving project costs well above original estimates. Unlike previous reports focusing on technical yield improvements, this analysis shifts focus to structural and financial hurdles. It underscores that the Arizona fab's cost structure is significantly heavier than in Taiwan, raising doubts about the economic efficiency of the politically motivated reshoring of chip production.

A parallel analysis from TrendForce points to a potential strategic side effect of TSMC's own policies. The company's strict "N-2" rule, which keeps the most advanced manufacturing technology exclusively in Taiwan for at least two years, could benefit competitors. Samsung, for instance, is strategically positioning its future 2-nanometer production to appeal to U.S. clients like AMD or Google, who may prioritize onshore production for security reasons.

Should investors sell immediately? Or is it worth buying TSMC?

Financial Performance and Analyst Sentiment

Current market pricing reflects a tension between near-term earnings strength from the AI boom and longer-term geopolitical and cost-driven risks. TSMC shares, up approximately 27% year-to-date and trading just below their 52-week high, already incorporate substantial optimism.

The confirmed demand dynamics align with assumptions from major analyst firms. Susquehanna analyst Mehdi Hosseini raised his price target to $400 in October, based on an expected annual AI demand growth rate in the mid-40 percent range—a picture now supported by Taiwan's export data.

From a technical perspective, the trend remains intact. The stock trades well above its 200-day moving average, while a Relative Strength Index (RSI) around 50 signals a neutral, not overbought, market condition. Following a period of consolidation around the €250 level, the equity appears to be searching for its next directional move rather than establishing a bottom.

Future Catalysts: Capex and the 2nm Node

The next visible milestone will arrive in January when TSMC provides its capital expenditure outlook for 2026. This guidance will reveal whether the cost overruns in Arizona are materially impacting planned investments or gross margins, or if premium pricing for AI chips can absorb these inefficiencies.

Operationally, the ramp-up of its 2-nanometer (N2) process technology in Taiwan, scheduled for late 2025 or early 2026, is coming into focus. Successfully executing this transition on schedule would likely cement TSMC's technological leadership in the AI segment. It could also create room for a share price re-rating toward the $350 to $400 range cited by more optimistic market observers.