Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM) stock rose nearly 1% in Wednesday’s premarket session. The chipmaker outperformed the broader market despite a cautious overnight tone. Nasdaq futures fell 0.21%, while S&P 500 futures slipped 0.05%.
Investors continued to support the stock’s longer-term uptrend. Buyers have also defended shares well above the 200-day simple moving average.
Xiaomi Taps Taiwan Semiconductor
In other news, Taiwan Semiconductor will produce three new chips for Xiaomi Corp. (OTC:XIACF). The deal expands Taiwan Semiconductor’s role in Xiaomi’s semiconductor strategy.
Xiaomi unveiled its Xring O3 smartphone processor Monday. Taiwan Semiconductor will make the chip using its advanced 3-nanometer process, Reuters reported, citing people familiar with the plans.
The Xring O3 has entered mass production. It will likely power Xiaomi’s next flagship foldable phone. Xiaomi aims to ship between 200,000 and 300,000 units.
Taiwan Semiconductor will also produce two other Xiaomi-designed processors. The 6-nanometer Xring O100 will support Xiaomi’s MiMo artificial intelligence model on consumer devices. Meanwhile, the 3-nanometer Xring D100 will target autonomous driving applications. Both chips could enter use next year.
Xiaomi has invested more than 20 billion yuan, or about $3 billion, in Xring development. It plans to invest at least 50 billion yuan ($7.0 billion) over 10 years. The strategy could reduce its reliance on Qualcomm Inc. (NASDAQ:QCOM) and MediaTek Inc. (OTC:MDTKF).
The D100 could also support Xiaomi’s growing electric vehicle business. The business delivered 104,199 vehicles in the second quarter.
Technical Analysis
Taiwan Semiconductor shares traded near $420. The stock was 14.2% above its 200-day SMA of $367.57. It was also 2.1% above its 100-day SMA of $411.20.
However, shares remained 1% below the 50-day SMA of $424.17. That level could limit gains in the near term.
The relative strength index stood at 50.21. This neutral reading suggests that neither buyers nor sellers have firm control. Therefore, the stock may need a fresh catalyst to break out of its current range.
The moving averages also send mixed signals. The 20-day SMA of $415.16 remains below the 50-day SMA. That is a bearish short-term signal. Still, the 50-day SMA remains above the 200-day SMA, supporting the longer-term bullish trend.
Key resistance stands at $436. A move above that level could open the door to further gains. Meanwhile, support sits near $385.50. That area could attract buyers during a deeper pullback.
Analyst Outlook
The stock trades at 31.1 times earnings. That represents a premium valuation compared with many peers.
Taiwan Semiconductor carries a Buy consensus rating. Its average price forecast is $552. Recent analyst actions include:
- Bernstein maintained an Outperform rating and raised its price forecast to $554 on Aug. 11.
- Needham maintained a Buy rating and raised its price forecast to $530 on July 27.
- DA Davidson maintained a Buy rating and raised its price forecast to $500 on July 17.
Benzinga Edge Rankings
The Benzinga Edge scorecard highlights Taiwan Semiconductor’s strengths and weaknesses compared with the broader market.
- Momentum: Bullish (Score: 85.86) — The stock’s trend strength remains a key pillar, consistent with its strong 12-month run.
- Quality: Bullish (Score: 97.24) — The scorecard flags strong underlying business quality, which often supports dip-buying during consolidations.
- Value: Neutral (Score: 30.91) — Valuation looks closer to “fair-to-premium” than cheap, so the chart may need continued execution to justify upside.
- Growth: Bullish (Score: 88.54) — Growth expectations remain a major part of the bull case, helping explain why buyers show up on pullbacks.
Overall, Taiwan Semiconductor has a strong growth, momentum and quality profile. However, its valuation could limit gains without continued earnings growth.
Top ETF Exposure
- VanEck Semiconductor ETF (NASDAQ:SMH): 9.28% weighting
- Lazard Emerging Markets Opportunities ETF (NYSE:EMKT): 7.45% weighting
- Harbor International Compounders ETF (NYSE:OSEA): 6.77% weighting
Taiwan Semiconductor’s large weighting means inflows or outflows from these funds can affect demand for its shares.
Price Action
Taiwan Semiconductor shares rose 0.62% to $420 in Wednesday’s premarket trading, according to Benzinga Pro.
Photo via Shutterstock
Login to comment