TSMC Stock Looks Like a Table-Pounding Gift After That 13% Correction

It’s about time that shares of Taiwan Semiconductor (NYSE:TSM | TSM Price Prediction) fell into a correction. While the price of admission is still on the steeper side of the historical range, with shares going for 32.8 times trailing price-to-earnings (P/E), I am more inclined to view the latest dip as more of a buying opportunity than anything else. Some of the more bullish sell-side analysts out there have price targets that seem to suggest the stock is more of a table-pounder at current levels.

While the AI trade has been dealt more volatility in recent months, shares of Taiwan Semiconductor have been steadily marching higher. Even after the latest spill, the shares are still in the green on a year-to-date basis, up just shy of 9%. As has been the case with most high-growth AI stocks with equally high expectations, Taiwan Semiconductor took a bit of a dive after it reported its latest round of quarterly earnings results. The numbers themselves were strong, but clearly not enough to spark anything less than a nasty dip.

Whether it’s the good, but not good enough, quarter that’s more to blame, rising geopolitical uncertainties (as well as oil prices), profit-taking across the biggest past-year AI winners, or fears of what could come if firms are overspending on AI, there’s no shortage of reasons to justify running for the hills. While others look to sell high with the intent of buying back lower, though, some of the bulls still think there’s reason to stay the course, even as the terrain facing the AI trade gets a bit rockier.

Structural tailwinds are still in play

Undoubtedly, most paths through the AI chip scene lead through Taiwan Semiconductor. Not a whole lot has changed about that. And while there are more players looking to get into the foundry business, I simply don’t see Taiwan Semiconductor’s dominance fading anytime soon.

At the end of the day, there’s only one firm that can make the world’s most advanced cutting-edge chips at a massive scale. And while some headwinds could reduce the magnitude of its tailwinds (most notably higher energy prices as a result of the conflict in the Middle East), I certainly wouldn’t bet against the firm’s ability to offset such pressures.

Taiwan Semiconductor’s wide moat and monopolistic positioning, I believe, grant it an unprecedented amount of pricing power. And given the hardware constraints across the AI scene, I certainly wouldn’t hesitate about Taiwan Semiconductor’s footing right here, even if the AI trade is bound to take a longer-duration breather.

With a sizeable order backlog and the 2nm process already sold out for the year, there’s quite a bit of visibility into the foreseeable future. And until things take a drastic turn going into 2027, it looks like Taiwan Semiconductor will still have what it takes to call the shots.

Are the bullish analysts right to stick with Taiwan Semiconductor?

The bullish analysts don’t seem all too rattled by the recent volatility hitting Taiwan Semiconductor stock. Bank of America’s Haas Liu has a $470.00 price target at the time of writing. Such a target implies close to 36% worth of upside from here. Liu recognizes Taiwan Semiconductor’s pricing power and its ability to defend the firm’s impressive margins.

Combined with strong 2nm demand, it’s clear that customers are going to need to pay up and wait their turn to get in on the latest and greatest. Any way you look at it, Taiwan Semiconductor might actually deserve a free pass, even as investors become more willing to rotate from AI and tech into defensives. Either way, I’m with Liu in that Taiwan Semiconductor has the pricing power. If anything, it feels like it’s Taiwan Semiconductor’s customers who are going to need to eat any higher prices.