When investing in the stock market, there is no better commodity than independent thought, as following the lead of other investors or professionals who share their views publicly can often be a futile endeavor. However, there are times when a little backing from the hands of experience can be useful, so long as investors don’t blindly follow the advice.
This is especially true of Wall Street analysts, as they often tend to keep their ratings and valuations aligned with their interests of protecting their careers and reputations alike. With this in mind, whenever investors feel compelled to act on a recent analyst upgrade or valuation boost, a certain degree of due diligence must be performed in order to avoid these pitfalls.
That is precisely what will be done on shares of Taiwan Semiconductor Manufacturing (NYSE: TSM), as a recent analyst upgrade and valuation boost have driven some motivated buyers into the stock. The more astute investors will first justify the change in valuations before even grabbing their phones or computers and opening a brokerage platform. It all starts from the top, the literal top.
What Themes Drive Demand for Taiwan Semiconductor Stock?
The technology sector is as cyclical as any other, with technology undergoing a research cycle of development and implementation, followed by a sales cycle where market adoption and the efficiency of this new technology are tested. As it turns out, the recent advancements made by the biggest names in the industry might bring everything around.
This is especially true with NVIDIA Co. (NASDAQ: NVDA) announcing its latest flagship product, the Blackwell. This hypercomputing chip will break the barriers of what has already been tested in the semiconductor industry, with willing buyers in the United States and the United Arab Emirates now signing up for new orders.
That is the textbook definition of the sales cycle. After a few months of developing the Blackwell, it is time to reap the rewards of hard work. Taiwan Semiconductor has a hidden tailwind because the company provides the equipment and chip technology that NVIDIA used to develop the Blackwell in the first place.
In any case, the success that will come along for NVIDIA will also be a factor in Taiwan Semiconductor’s success, and perhaps why a new valuation boost has been assigned to the stock, despite already trading at 94% of its 52-week high, thereby calling for uncharted territory.
The Market’s Take on Taiwan Semiconductor Stock
Analyst Mehdi Hosseini from Susquehanna has not only reiterated a Positive rating on Taiwan Semiconductor stock as of mid-June 2025 but also slapped a valuation target of up to $255 per share on the company. Compared to its current trading price, this view predicts a 19% additional upside for the stock, along with a new 52-week high.
That can be taken as one standalone gauge for investors to consider in their potential buying thesis, but one isn’t enough in situations like these. Another factor to consider is that $8.3 billion worth of institutional capital was invested in Taiwan Semiconductor stock as of the most recent quarter, signaling new confidence despite recent S&P 500 volatility.
More importantly, as the stock approaches (and even breaks) its 52-week high prices, chances are that more institutional buyers who get in on momentum rules will likely pour in again with more aggressive buying. This is a purely technical way to act on the fundamentals of what is happening in the broader industry, but it is valid nonetheless.
Of course, the sales cycle in the industry, which significantly benefits a name like Taiwan Semiconductor, can be quantified in how Wall Street analysts see the company’s earnings per share (EPS) going for the rest of 2025. Analysts now forecast up to $2.65 in EPS for the fourth quarter of 2025, a massive jump from today’s reported $2.12 in EPS.
That 25% increase aligns perfectly with the kind of upside this Susquehanna analyst is suggesting, reinforcing the fact that stock price performance usually correlates with underlying EPS growth rates. Now, there is another subtle factor that most investors have likely missed in Taiwan Semiconductor.
The company trades at a price-to-book (P/B) valuation of over 10.5x today, placing it second only to NVIDIA among the peer group of chipmakers and semiconductors. This happens because NVIDIA has gotten the most attention and is the more flexible player in customer acquisition.
However, the second in command is Taiwan Semiconductor, which controls the leading technology, allowing NVIDIA and other major players to continue producing the chips that keep their lights on. The market knows this, which is why it has placed a premium on the company over others, revealing to investors the expectations that lie beneath it.
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