According to the Wise Money app, Taiwan Semiconductor (TSM.US) stock price has recently rebounded to a record high, but this uptrend faces a key test. After ASML Holding (ASML.US) triggered a global chip stock decline with its disappointing performance, market attention has turned to the financial report that Taiwan Semiconductor is scheduled to release on Thursday.

Due to the market's easing concerns about the latest artificial intelligence (AI) products from Nvidia (NVDA.US), and optimistic views on Apple's (AAPL.US) iPhone, Taiwan Semiconductor stocks have once again won investors' favor. Taiwan Semiconductor's stocks listed in the USA have risen by 30% from their low point in August, reaching a new high.

Taiwan Semiconductor (TSM.US) stock price rebounded to a new high before the results announcement.

Market observers state that with the artificial intelligence driving Taiwan Semiconductor's preliminary sales performance for the latest quarter surpassing expectations, strong performance guidance may once again boost the company's stock price. Taiwan Semiconductor's comments on demand will be closely monitored, especially after ASML's downward revision of performance expectations outside artificial intelligence led to a global decline in chip stocks.

Kevin Net, Asia stock manager at Financiere de L Echiquier, stated that strong guidance and potential comments on demand for 2025 "may boost stock prices." Taiwan Semiconductor's capital expenditure may "ultimately reach the high end of the guidance range, around 32 billion US dollars," indicating a strong outlook.

Just a few months ago, investors were selling artificial intelligence stocks, fearing that the technology would not meet the high profit expectations. This year, the market's earnings per share expectations for Taiwan Semiconductor have increased by 37%, reaching an all-time high.

Taiwan Semiconductor's third-quarter financial report is expected to show improving profitability, with analysts forecasting a gross margin of 54.8%, the highest level in six quarters.

After Taiwan Semiconductor raised its sales growth target in July, the company's full-year forecast will be particularly scrutinized. Gary Tan, portfolio manager at Allspring Global Investments, mentioned that the capacity increase for NVIDIA's Blackwell chips and the progress in Taiwan Semiconductor's advanced packaging capacity expansion are key focuses.

Despite concerns about the bleak outlook for lithography giant ASML triggering worries for the entire industry, Taiwan Semiconductor is seen as more resilient than ASML. ASML is a major equipment supplier for Taiwan Semiconductor. Analysts believe that Taiwan Semiconductor's long-term outlook should not be affected, as it depends on the demand for high-end chips used for training and hosting artificial intelligence models.

Nomura Holdings analyst Aaron Zheng and others stated last week: 'Artificial intelligence continues to be a driving factor for Taiwan Semiconductor's fundamentals and valuation.' Any negative impact from non-AI business is limited, 'as the supply chain construction has been very cautious, we therefore expect a more significant cyclical rebound by 2025.'

In addition to fundamental factors, some market observers also warn of geopolitical concerns ahead of the US election. To hedge geopolitical risks, Taiwan Semiconductor is investing billions of dollars to establish new production bases in the United States, Japan, and Germany.

The market generally expects a 16% increase in Taiwan Semiconductor's US stocks over the next 12 months. Valuation is not high, with an expected PE ratio of 23 times for its American depositary shares, compared to a peak of 34 times in 2021.

As of the close of US stocks on Wednesday, Taiwan Semiconductor rose slightly by 0.19%, after falling 2.6% the previous day due to news about ASML.