Editor's note: Any and all references to time frames longer than one trading day are for purposes of market context only, and not recommendations of any holding time frame. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don't have the resources, time or inclination to constantly monitor and manage your positions, leveraged and inverse ETFs are not for you.

Taiwan Semiconductor Manufacturing Company (Ticker: TSM) has long been the backbone of the global chip supply chain—but recent headlines suggest that backbone may be under pressure. Between rising U.S. investment, new AI chip designs, evolving Taiwanese policy, and increased geopolitical risk, the world’s most important foundry is navigating one of its most complex moments yet.

TSM recently held its 2025 Technology Symposium, revealing major plans to meet rising AI compute demands—including the launch of massive new chip packaging to support advanced model training.

At the same time, it reported solid earnings, with strong foundry demand offset slightly by cautious investor sentiment around China’s push for self-reliance in semiconductors. With a fresh competitive threat from Huawei and a shifting regulatory backdrop in Taiwan, traders have plenty to watch.

Below is a daily chart of TSM, as of May 2, 2025.

Source: StockCharts.com, May 2, 2025.

Candlestick charts display the high and low (the stick) and the open and close price (the body) of a security for a specific period. If the body is filled, it means the close was lower than the open. If the body is empty, it means the close was higher than the open.

The performance data quoted represents past performance. Past performance does not guarantee future results.

Let’s break down the bull and bear sides of the TSM trade.

Bullish Catalysts

Here are three reasons why TSM still looks strong:

1. AI Chip Expansion Signals Leadership

TSM is doubling down on its position in the AI hardware race. The company recently unveiled plans for enormous new chip packages—up to five times the size of current designs—to help customers like Nvidia meet the growing size and complexity of AI workloads. As the enabler behind many of the world’s most advanced chips, TSM is reinforcing its role as the critical infrastructure layer of the AI boom.

2. U.S. Fabs and Regulatory Flexibility

After pledging more than $100 billion in U.S. chip investments, TSM received a policy boost: Taiwan will no longer restrict the company from producing leading-edge nodes abroad. This change could make the company more globally agile, reduce geopolitical concentration risk, and help unlock subsidies through U.S. initiatives like the CHIPS Act. In short, it gives TSM more room to grow—and defend its leadership.

3. Analyst Confidence Holds

Bank of America reiterated its “Buy” rating following the company’s recent tech symposium, citing continued strength in advanced packaging and demand from major customers. While short-term valuation concerns persist, many on the Street still view TSM as a long-term winner in the AI compute arms race.

Bearish Catalysts

For the bears, here are some areas where risks are rising:

1. Huawei’s Surprise AI Chip Push

One of the biggest shockwaves in recent weeks came from Huawei, which is reportedly testing a new AI chip that could rival Nvidia’s top offerings. Since Nvidia’s designs are fabricated by TSM, any threat to Nvidia’s dominance could reverberate through TSM’s order book. And if China successfully builds a domestic alternative, TSM’s moat may narrow faster than expected.

2. Geopolitics and Buffett’s Exit Still Linger

Despite strong execution, investors remain uneasy about TSM’s exposure to Taiwan. The political risks—both real and perceived—can overshadow even the best product pipeline. Berkshire Hathaway’s 2023 sale of its TSM position still looms in investor memory. Even if Buffett called it a “portfolio decision,” traders may take that as a signal of caution.

3. Valuation and Supply Chain Challenges

While TSM’s scale is a strength, it also makes the company vulnerable to demand shifts and capex* missteps. Building new fabs in the U.S., Japan, and potentially Europe is a logistical feat—and one that could strain margins if ramp-ups are slower than expected. Add in competitive pricing pressure from Samsung and Intel, and the runway may not be as smooth as bulls hope.

How to Trade the TSM Narrative

For traders looking to take a short-term view on Taiwan Semiconductor, Direxion offers a pair of single-stock ETFs designed to magnify daily moves:

• Direxion Daily TSM Bull 2X Shares (Ticker: TSMX) seeks daily investment results, before fees and expenses, of 200% of the performance of Taiwan Semiconductor Manufacturing Company (Ticker: TSM).

• Direxion Daily TSM Bear 1X Shares (Ticker: TSMZ) seeks daily investment results, before fees and expenses, of 100% of the inverse (opposite) of the performance of Taiwan Semiconductor Manufacturing Company (Ticker: TSM).

These ETFs are intended for traders who have a high-conviction view on the direction of TSM in the very short term—and who understand the risks associated with using leverage and inverse products. As always, these tools are not buy-and-hold investments, but tactical vehicles designed to express a directional view on a single stock.

Looking Ahead: Innovation vs. Uncertainty

TSM sits at the center of multiple narratives: AI acceleration, global supply chain reshaping, U.S.-China competition, and advanced manufacturing. While it continues to lead in foundry technology, the competitive and geopolitical landscape is shifting fast. For traders, that means opportunity—but also risk.

As the story continues to unfold, TSMZ and TSMX provide tactical ways to trade the push and pull of one of the world’s most important companies.

*Definitions and Index Descriptions

An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.

Leveraged and Inverse ETFs pursue daily leveraged investment objectives which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying index over periods longer than one day. They are not suitable for all investors and should be utilized only by sophisticated investors who understand leverage risk and who actively manage their investments.

Direxion Shares Risks – An investment in a Fund involves risk, including the possible loss of principal. Each Fund is non-diversified and includes risks associated with a Fund concentrating its investments in a particular security, industry, sector, or geographic region which can result in increased volatility. A Fund’s investments in derivatives such as futures contracts and swaps may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including imperfect correlations with underlying investments or the Fund’s other portfolio holdings, higher price volatility and lack of availability. As a result, the value of an investment in a Fund may change quickly and without warning.

Leverage Risk – The Bull Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. A total loss may occur in a single day. Leverage will also have the effect of magnifying any differences in the Fund’s correlation with TSM and may increase the volatility of the Bull Fund.

Daily Correlation Risk – A number of factors may affect the Bull Fund’s ability to achieve a high degree of correlation with TSM and therefore achieve its daily leveraged investment objective. The Bull Fund’s exposure to TSM is impacted by TSM’s movement. Because of this, it is unlikely that the Bull Fund will be perfectly exposed to TSM at the end of each day. The possibility of the Bull Fund being materially over- or under-exposed to TSM increases on days when TSM is volatile near the close of the trading day.

Daily Inverse Correlation Risk – A number of factors may affect the Bear Fund’s ability to achieve a high degree of inverse correlation with TSM and therefore achieve its daily inverse investment objective. The Bear Fund’s exposure to TSM is impacted by TSM’s movement. Because of this, it is unlikely that the Bear Fund will be perfectly exposed to TSM at the end of each day. The possibility of the Bear Fund being materially over- or under-exposed to TSM increases on days when TSM is volatile near the close of the trading day.

Taiwan Semiconductor Manufacturing Co., Ltd. Investing Risk – TSM faces risks associated with the highly competitive nature of the semiconductor industry; economic and market uncertainty; reductions in demand for its products; potential concentration of revenues in a few large clients as among other risks.

Semiconductor Industry Risk – Semiconductor companies may face intense competition, both domestically and internationally, may have limited product lines, markets, financial resources or personnel and may face risks related to the availability of materials.

Information Technology Sector Risk — The value of stocks of information technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, government regulation, and competition, both domestically and internationally, including competition from competitors with lower production cost.

Additional risks of each Fund include Effects of Compounding and Market Volatility Risk, Derivatives Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Industry Concentration Risk, Market Risk, Indirect Investment Risk, and Cash Transaction Risk. Additionally, for the Direxion Daily TSM Bear 1X Shares, Shorting or Inverse Risk. Please see the summary and full prospectuses for a more complete description of these and other risks of a Fund.

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