Why TSMC Stock Is Soaring Today

Key Points

• TSMC will not be subject to a new 100% tariff on foreign-sourced chips, and its stock has risen to a new all-time high.

• The tariff exemption will benefit TSMC on multiple levels, and it's also good news for the broader semiconductor industry.

• TSMC's central role in AI and chip manufacturing has made it one of the most important companies in the world.

• 10 stocks we like better than Taiwan Semiconductor Manufacturing ›

Taiwan Semiconductor Manufacturing (NYSE: TSM) stock is surging to a new all-time high Thursday. The semiconductor fabrication leader's share price was up 5.3% as of 10:15 a.m. ET. At the same point in the daily session, the S&P 500 was up 0.3%, and the Nasdaq Composite was up 0.7%. The chip stock had been up as much as 7.1% earlier in the session.

TSMC's valuation is roaring higher after the White House confirmed that the company will not be subject to a newly announced 100% tariff on semiconductors. The development looks to be a major positive catalyst for the company, and investors are responding by buying its stock in droves.

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TSMC stock rallies on tariff exemption

TSMC will not be subject to a recently announced 100% import tax on foreign-sourced semiconductors. Given that TSMC is the far-and-away leader when it comes to contract semiconductor manufacturing services, the development suggests huge benefits for the company and also the broader semiconductor industry.

Being exempt from the new tariff should help keep TSMC's strong sales and earnings momentum alive and also strengthen it against competitors. While the company already holds a dominant position in the contract chip manufacturing space, the new tariffs will make it even harder for Samsung and other non-domestic chip fabricators to gain market share from TSMC.

What's next for TSMC?

TSMC has been posting very strong sales and earnings growth as demand for artificial intelligence (AI) semiconductors and other chips for data centers has soared. According to some estimates, the company manufactures somewhere around 90% of the world's advanced AI chips -- and its fabrication technologies offer performance advantages that make it likely that the category leader will retain its command over the market for the foreseeable future.

As a result of its importance in the AI space and broader chipmaking capabilities, TSMC has taken on a high level of geopolitical importance. The company's exemption from the new chip tariffs stemmed from its moves to dramatically increase its U.S. manufacturing operations, and geopolitical dynamics will likely continue to be a key performance catalyst for the stock.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.