Taiwan Semiconductor: Is Now the Time to Buy Into TSMC’s AI-Driven Growth?

Taiwan Semiconductor Manufacturing Company Ltd. (TSM) has surged to record highs, fueled by strong earnings and demand for AI chips. The stock has gained over 300% since its 2022 bottom, reflecting robust institutional interest. On the other hand, Q2 2025 earnings marked a turning point, with record profits and the biggest quarterly gain in the company’s history. This article examines the price action, financial performance, investor signals, and potential risks surrounding TSMC’s parabolic move. The company is seeking further growth based on its technical and financial performance.

Parabolic Surge in Taiwan Semiconductor (TSMC) Fueled by AI Boom

TSMC has demonstrated strong growth throughout the 21st century. This growth has fueled an exponential rise in its stock price, as seen in the quarterly chart below. The stock bottomed in 2022 at $59.43 and has since rallied to the $250 area, marking a gain of over 300%.

Another major rally occurred during the COVID-19 crisis from 2019 to 2021, highlighting the company’s resilience and strong demand for semiconductors. In Q2 2025, the stock showed heightened volatility and formed the largest historical quarterly candle, reflecting strong investor interest and earnings momentum.

This strong surge in Q2 2025 was driven by significant growth in the company’s profitability. Record demand for AI and high-performance computing chips supported the profitability. TSMC also accelerated its facility expansion in Arizona by fast-tracking new fabs to meet US client demand, reinforcing its global capacity and boosting investor confidence. These combined factors fueled the Q2 price rally and positioned TSMC as a compelling long-term buy.

As Q3 2025 begins, historical patterns suggest continued upward momentum, with August and September poised to be key months for further gains. The quarterly chart above shows that the parabolic move from the 2022 low indicates sustained institutional accumulation. Each correction within this broader uptrend has produced a buying opportunity.

It is interesting to note that the bottom in January 2019, at $34.21, led to a strong surge, reaching a high of nearly $145 in 2022. This surge shows an increase of over 320%. Similarly, the rally from the 2022 bottom to the 2025 high has also produced a gain of around 310%. This symmetrical price behaviour suggests that Taiwan Semiconductor may be approaching a potential peak, followed by a possible correction. However, any correction could present a long-term buying opportunity for investors looking to build positions.

TSMC Q2 2025 Earnings Beat Expectations on AI Chip Demand

Taiwan Semiconductor reported strong Q2 2025 results, driven by record-high revenue and earnings growth. The chart below shows that the company has recorded revenue of $30.35 billion, representing 38.6% year-over-year growth and 17.8% quarter-over-quarter growth. On the other hand, the net income increased by 60.7% to $12.95 billion.

Similarly, the EPS has reached $2.497 and shows consistent growth since the 21st century. This growth reflects robust demand for advanced chips.

Moreover, the company also posted exceptional margins, highlighting operational efficiency. The chart below shows that the gross margin was 58.62%, while the operating margin reached 49.63%. Net profit margin stood at a strong 42.7%. These figures demonstrate TSMC’s pricing power and production scale in the semiconductor industry, particularly in high-margin segments such as AI and HPC chips.

The advanced node shipments contribute to TSMC’s strong financial performance. The 3nm process accounted for 24% of wafer revenue, while 5nm and 7nm nodes contributed 36% and 14%, respectively. In total, 74% of revenue came from advanced technologies, reinforcing TSMC’s leadership in cutting-edge semiconductor manufacturing. The company continues to benefit from accelerating demand for AI-related products, with management expecting strong momentum into Q3 2025.

Based on the strong growth in Q2 2025 and the demand for AI chips, the company is considered a strong buy due to its consistent growth, high profitability, and leadership in advanced node technologies. Therefore, the Q3 2025 is expected to revenue between US$31.8B and US$33.0B, with gross margins between 55.5%–57.5%. Moreover, the operating margin outlook remains strong at 45.5%–47.5%.

Technical Patterns Suggest Buy Signals for TSMC

To better understand the next move in TSMC and the key actions investors should consider, the monthly chart below illustrates intense bullish price action. The chart below shows that TSMC formed an inverted head-and-shoulders pattern, with the left shoulder appearing in the last quarter of 2020, the head in 2022, and the right shoulder during the second and third quarters of 2023.

The bullish breakout occurred near the $135-$140 area, triggering a strong upward move. Notably, the price retested this neckline twice, forming strong buy signals each time before surging to $250.

This breakout at $135 was confirmed in late 2023. The breakout validates the pattern and points to continued upside potential. While short-term corrections may occur, these pullbacks should be viewed as key opportunities for long-term investors to accumulate shares ahead of the next growth phase.

Should You Buy TSMC Now? Key Technical Levels for Investors

Based on the above discussion, Taiwan Semiconductor appears well-positioned to benefit from the emerging AI trend. However, the stock currently trades at elevated levels. Therefore, investors need to evaluate the next action by analysing key technical levels and price trends. The daily chart for TSMC shows that the stock generated a strong buy signal around the $135 area.

The inverted head-and-shoulders pattern visible on the monthly chart is also reflected on the daily chart, where three distinct buy signals appeared near $135. These signals led to a sharp rally, pushing the stock price toward the $250 level.

Following this surge, the chart displays multiple peaks that form a wedge pattern. These peaks indicate that the stock may be nearing a short-term top and could correct toward lower support levels.

The key support areas include $220, $205, and $190, which also align with Fibonacci retracement levels drawn from the $135 low. Additionally, these levels correspond with the 250-day SMA, reinforcing the underlying bullish trend. Investors may consider accumulating shares at these support levels and adding more if the price corrects further toward the $135-$140 region.

TSMC Stock Risks: Volatility and Geopolitical Uncertainty

TSMC faces multiple risks despite its strong growth. The stock has surged over 300% since its 2022 low, creating elevated price levels. This parabolic rise increases the chance of a sharp pullback, especially if market sentiment shifts or momentum slows. The current rising wedge pattern also suggests a possible short-term top, signaling that a correction may follow soon.

On the other hand, the volatility remains high after the record Q2 2025 move. The large quarterly candle indicates aggressive buying, but it also reflects potential instability. Taiwan Semiconductor relies heavily on AI and high-performance computing chip demand. If tech spending slows or AI adoption plateaus, revenue growth could stall. Additionally, global economic pressures, including rising inflation, could negatively impact semiconductor demand.

Furthermore, geopolitical tensions add further uncertainty. As a Taiwan-based company, TSMC is exposed to risks from cross-strait relations with China. Any escalation could disrupt supply chains and investor confidence. Meanwhile, its US expansion involves high costs and operational risks. Construction delays or policy shifts could weigh on margins. These risks highlight the importance of monitoring both technical support levels and global developments before making long-term investment decisions.

Final Thoughts

Based on the above discussion, Taiwan Semiconductor has demonstrated exceptional growth, driven by strong financial performance and rising demand for AI chips. The stock price remains within the parabolic surge and is looking to break new highs.

The technical indicators also confirm bullish momentum, with breakout patterns and consistent buy signals supporting the long-term uptrend. However, the emergence of a wedge pattern shows strong resistance in the $250-$260 region. A short-term correction may develop from this region, which will be considered a strong buying opportunity for long-term investors. A break above $260 will negate the potential for a short-term correction and initiate another surge to new record levels.

The elevated prices, geopolitical tensions, and global economic pressures could lead to volatility. Despite these risks, TSMC’s leadership in advanced chip production, strong margins, and strategic expansion suggest it will continue to outperform. Investors should monitor key support levels and view corrections to $220, $205, and $190 as opportunities to buy into a long-term growth story. The stock remains strongly bullish as long as the long-term support of $135 holds.