Investors will find that most of the market’s attention has centered on today's technology sector, particularly stocks dealing with artificial intelligence and its growing adoption throughout the global economy. For better reference, investors can dig into the VanEck Semiconductor ETF (NASDAQ: SMH) to filter out their picks further. Eventually, the list will come down to a handful of stocks.

Within that handful, shares of NVIDIA Co. (NASDAQ: NVDA) will have a special place, checking off the momentum and financial growth items. NVIDIA is not operating in a vacuum, though, as other players are starting to make a splash in the chips and semiconductors arena. Most recently, stocks like Intel Co. (NASDAQ: INTC) and Micron Technology Inc. (NASDAQ: MU) have also seen bullish price action. But there is one ace up the industry’s sleeve.

Shares of Taiwan Semiconductor Manufacturing (NYSE: TSM) are at a new all-time high. The driver behind this rally is simply the company’s financials, which just showed a double-digit revenue increase. This recent announcement serves more as a preview than a retrospective, indicating that the company is poised for significant growth in the coming quarter.

Investing in Taiwan Semiconductor: A Supercycle on the Horizon

With rising geopolitical concerns between the United States and China, particularly around Semiconductor and chip technology, some investors were concerned about whether Taiwan Semiconductor would be safe from tariff and embargo repercussions. The answer isn’t unclear; the U.S. is doing the right thing today with a Chinese invasion of Taiwan looming.

The government has granted Taiwan Semiconductor up to $6.6 billion in its latest round of funding. The capital will be deployed to make semiconductor factories onshore in states like Arizona and Ohio. Bringing the semiconductor supply chain to domestic borders will help American tech companies better control pricing and inventories.

Investors should pay attention to this. The government had many chip providers to choose from, so why Taiwan Semiconductor? The company supplies chips to most of today’s technology and consumer electronics behemoths.

That’s right. Names like Apple Inc. (NASDAQ: AAPL) rely on Taiwan to get their chips, and so does NVIDIA. With Apple on the brink of announcing its new iPhone 16, which is said to have increased artificial intelligence capabilities, especially after Apple partnered with OpenAI, Taiwan Semiconductor’s chips became more of a commodity.

Not only that, but NVIDIA has now gone through what’s known as the chip spending cycle, where the company had to deploy more capital into marketing and sales efforts. This cycle is followed by the development cycle. After sales are made, it is time to return to the drawing board and spend on research and development (R&D) to develop a new product.

Taiwan Semiconductor is behind all of these new supercycles, and the markets have taken notice of this massive exposure.

Why Optimism Is Blooming for Taiwan Semiconductor Stock

Recently, Taiwan Semiconductor Manufacturing reported a 40% revenue increase over the year. Investors can refer to NVIDIA for reference in the semiconductor cycle today and recall that it is on the spending (not the development) end of the spectrum.

So, with Taiwan Semiconductor reporting momentum in its revenue, the next inning of the spending cycle will fall on that stock after NVIDIA. For starters, the spending cycle involves a jump in revenue, followed by a trickle-down effect in bigger earnings per share (EPS).

With this potential future trend in mind, investors can now look to Wall Street to determine whether Taiwan Semiconductor stock is treading on the side of reality. Analysts at Susquehanna felt comfortable enough to boost the stock’s price target to $250 a share, or 33% higher than where it trades today.

In other news, Wall Street is now forecasting up to 25.6% EPS growth for the next 12 months, which appears to be on the conservative side. NVIDIA analysts also want to see EPS growth of 25.3%, yet valuations couldn’t be further apart.

NVIDIA trades at a P/E ratio of 50.0x, while Taiwan Semiconductor stock trades at a much lower 30.8x. If EPS drives valuations, and both stocks are looking to grow by the same amount, then how come their valuations are that much different?

The answer is geopolitical risks, or at least the perception that there are some. As investors now know, the United States is mobilizing the treasury to mitigate these risks, and knowing that Taiwan Semiconductor is a key player in domestic electronic consumption and leadership in artificial intelligence, it is likely that the government won’t let this company be harmed.

That’s why investors shouldn’t be worried, just like institutions weren’t. Over the past 12 months, up to $71.2 billion of institutional investment capital made its way into Taiwan Semiconductor stock, all to show the same vote of confidence that the government sent in for the stock.