Taiwan Semiconductor-Heavy ETFs in Focus on Upbeat Earnings

On Oct. 16, 2025, Taiwan Semiconductor Manufacturing Co. TSM or TSMC reported a 39.1% year-over-year increase in third-quarter profit, beating estimates and hitting a fresh record as demand for artificial intelligence chips remained healthy. TSMC also boosted its 2025 revenue growth outlook for the second time this year.

TSMC, which is the supplier of advanced AI processors to Apple Inc. and Nvidia Corp., now expects its annual sales to grow in the mid-30% range, a few percentage points higher than its previous forecast. The upgraded outlook is noteworthy, as it came just three months after its last hike, per Bloomberg, as quoted on Yahoo Finance.

The company’s revenues of NT$989.92 billion New Taiwan dollars came against NT$977.46 billion expected (per LSEG SmartEstimates, as quoted on CNBC). Its net income of NT$452.3 billion also topped the LSEG estimate of NT$417.69 billion, the CNBC article indicated.

“Recent developments in AI market continue to be very positive,” TSMC CEO C.C. Wei said on an earnings call, noting that the growing consumer adoption of AI models has led to increased demand for computation and consequently, a greater need for semiconductor products. “Thus, our conviction in the AI megatrend is strengthening,” Wei added, as mentioned on CNBC.

TSMC Stock Performance

The AI boom has boosted TSMC shares, with its stock leaping 75% over the past six months, compared with a 26% rally for the S&P 500. This has taken the company’s market capitalization to $1.56 trillion.

Taiwan Semiconductor stock currently has a Zacks Rank #3 (Hold). The TSMC stock comes from a top-ranked Zacks Semiconductor - Circuit Foundry Industry (top 40%) and a top-ranked Zacks Computer and Technology sector (top 6%).

Decent Valuation

Despite TSMC's strong outlook, the stock does not possess a high valuation. On a trailing price-to-earnings (P/E) ratio basis, Taiwan Semiconductor currently trades at a P/E (trailing 12 months) of 34.74X versus 29.72X possessed by the underlying industry.

The price/book (most recent quarter) ratio of the TSMC stock is 10.53X, versus the 9.70X recorded by the industry. The price/cash flow (most recent fiscal year) ratio of TSMC is 27.87X versus the 25.67X recorded by the industry.

Less Trade Tensions for TSMC?

TSMC executives indicated that they have been watching U.S. tariff developments as Taiwan negotiates for a lower reciprocal rate and Washington weighs industry-specific duties on semiconductors. However, TSMC may be granted some exemptions as the company is investing heavily in the U.S. facilities, as mentioned in the same CNBC article.

TSMC ETFs in Focus

Apart from the TSMC stock itself, investors can play the stock in the ETF form. The TSMC-heavy ETFs include SP Funds S&P World (ex-US) ETF SPWO (TSMC’s weight 15%), SP Funds S&P Global Technology ETF SPTE (TSMC’s weight 11.58%), Global X Emerging Markets Great Consumer ETF EMC (TSMC’s weight 11.83%), AXS Esoterica NextG Economy ETF WUGI (TSMC’s weight 10.3%) and VanEck Semiconductor ETF SMH (TSMC’s weight 10.2%).

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This article originally published on Zacks Investment Research (zacks.com).

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