Recent performance snapshot

Taiwan Semiconductor Manufacturing (NYSE:TSM) has drawn fresh attention after a strong year-long share move, with the stock showing a 1,115% total return over the past 12 months.

Over shorter periods, returns of 2.3% in the past day, about 0.5% in the past week, roughly 9.7% over the past month and around 11.4% in the past 3 months give investors a concise view of recent trading momentum.

At a share price of $401.62, Taiwan Semiconductor Manufacturing’s recent 1-month share price return of 9.66% sits alongside a very large 1-year total shareholder return. This suggests that momentum has been building rather than fading.

If you are looking beyond TSM for other beneficiaries of growing chip demand, it could be a good moment to scan the market for 44 AI infrastructure stocks

With Taiwan Semiconductor Manufacturing now valued at roughly $1.79b and trading at $401.62 per share, is the recent strength still leaving the stock undervalued, or is the market already pricing in future growth?

Most Popular Narrative: 40% Overvalued

According to the most widely followed narrative, Taiwan Semiconductor Manufacturing's fair value of $400 sits slightly below the last close at $401.62. This frames the current rally in a different light.

TSMC is the central pillar of the global semiconductor ecosystem, powering the AI revolution with unmatched scale, cutting-edge process technology, and disciplined execution. With record profits, dominant client base, and massive expansion underway, both in Taiwan and abroad, it stands as a low-risk way to own the AI infrastructure wave. Although geopolitical and trade risks loom, its moat, margins, and market position offer a rare combination of growth, profitability, and stability.

Curious what sits behind this premium tag? The narrative leans heavily on accelerating earnings, high margins and a rich profit multiple tied to AI demand. The exact assumptions might surprise you.

Result: Fair Value of $400 (OVERVALUED)

However, this upbeat story still hinges on sensitive points, including heavy reliance on a few large customers and ongoing geopolitical and trade tensions around Taiwan and China.

Another view on valuation

The user narrative leans on a fair value of $400, which suggests Taiwan Semiconductor Manufacturing is slightly overvalued at $401.62. Yet on a P/E of 29.7x, the stock sits far below the US Semiconductor industry at 63x, peers at 76.6x, and an estimated fair ratio of 48.3x. That gap points to very different opinions about risk and upside, so which signal matters more for you?

Next Steps

Seeing both enthusiasm and concern around TSM, it makes sense to look at the details yourself and not rely on a single angle. To weigh up both sides of the story quickly, focus on the 4 key rewards and 1 important warning sign

Looking for more investment ideas?

If you stop with just one stock, you could miss other compelling setups that match your goals, risk appetite and income needs across the market.

• Target potential mispricings by scanning a curated list of companies that look attractively valued using the 51 high quality undervalued stocks.
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• Hunt for future standouts by reviewing the screener containing 21 high quality undiscovered gems before they are widely on the radar.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.