TSMC repeatedly hits high but valuation remains fair: Analyst

Taipei, April 28 (CNA) Shares of contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) have repeatedly hit new highs, but an equity analyst said the stock's valuation remains within a reasonable range and any pullback would likely be technical.

Speaking with CNA, Cathay Futures Consultant analyst Tsai Ming-han (蔡明翰) said TSMC's historical price-to-earnings (P/E) ratio has ranged between 20 and 30.

With market consensus expecting TSMC to post earnings of about NT$100 (US$3.17) per share in 2026, supported by strong global demand for AI applications, and the stock currently trading at a P/E ratio of under 25, Tsai said the valuation remains within its historical range.

On Monday, TSMC, which accounts for more than 40 percent of the market's total value, rose 3.66 percent to close at NT$2,265.00, off an intraday high of NT$2,330,00, serving as a key driver of gains on the local main board. The Taiex, the Taiwan Stock Exchange's benchmark index, rose 1.76 percent to 39,616.63 after briefly topping the 40,000-point mark.

Goldman Sachs, one of the foreign brokerages bullish on TSMC's outlook, issued a target price of NT$2,330 in early January, citing expected growth in output of its advanced 2-nanometer process and high-end chip-on-wafer-on-substrate (CoWoS) IC assembly services amid the AI boom.

Among other foreign brokerages, CLSA has set the highest target price at NT$3,030 for TSMC shares, followed by Citigroup at NT$2,875, Nomura at NT$2,800 and HSBC at NT$2,820.

Among local brokerages, Yuanta Securities and KGI Securities have set target prices of NT$2,600, while SinoPac Securities has set a target of NT$2,615.

Last week, the Financial Supervisory Commission said active exchange-traded funds (ETFs) would be allowed to exceed the current 10 percent cap on holdings in a single stock if that stock accounts for more than 10 percent of total market value.

As TSMC is currently the only stock meeting that threshold, it is expected to be the main beneficiary of the new rule, which could provide further support for its share price.

TSMC will not be allowed, however, to top 25 percent of any ETF's net assets, according to the FSC.

Still, Tsai said that if TSMC shares approach NT$3,000, corresponding to a P/E ratio above 29, the stock could face overheating risks and the broader market could come under pressure, accordingly.