Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) shares ticked higher in Monday's premarket session, as investors waded back into semiconductor stocks after last week's selloff. Nasdaq futures rose 0.51%, and S&P 500 futures gained 0.23%, signaling a broader tech rebound.

The bounce comes after a late-week dip triggered by concerns over Taiwan Semiconductor's hefty capital expenditure plans, even though the company delivered a blockbuster second-quarter earnings report. Fresh headlines about its U.S. expansion also helped lift sentiment.

Arizona Expansion Powered by AI

CFO Wendell Huang told CNBC on Sunday that Taiwan Semiconductor continues to see "strong, multi-year structural demand" driven by artificial intelligence. He made it clear the company isn't about to leave growth on the table for competitors, saying it expects to keep delivering profitable growth as long as the AI megatrend holds.

Huang said the company is accelerating leading-edge capacity, including converting 5-nanometer production to 3-nanometer technology. The first Arizona fab, which makes 4-nanometer chips, is already up and running, while 2-nanometer technology is emerging as a new revenue driver.

Speaking to Reuters on Thursday, Huang said Taiwan Semiconductor is "very happy" with progress in Arizona. He attributed the decision to boost the company's Arizona investment to $265 billion to strong customer demand and U.S. government support. He added that the first Arizona fab is producing yields "as good as" the company's flagship facility in Taiwan.

Analysts Flag Margin Risks Despite Growth

Huang also told Bloomberg on Friday that Taiwan Semiconductor is expanding capacity wherever possible to support customer growth and ensure competitors don't scoop up unmet demand.

But not everyone is cheering. GF Securities analysts Jeff Pu and Henry Huang told Bloomberg that the accelerated capital spending reflects the rapid expansion of the AI market and could signal demand spillover or competitive pressure. They downgraded the stock, saying they don't expect margins to expand over the coming quarters because Taiwan Semiconductor is unlikely to pursue aggressive pricing.

Separately, Huang told Reuters that the company will continue introducing its most advanced manufacturing technologies in Taiwan first, citing the close collaboration needed between research teams and production facilities. He also noted that limited land availability in Taiwan means future sites will be prioritized for next-generation manufacturing.

Wall Street Still Bullish

Despite the downgrade, the broader analyst community remains positive. The consensus rating is a Buy, with an average price target of $543.33. Following the earnings report, Barclays raised its price target to $650, DA Davidson increased its target to $500, and TD Cowen lifted its target to $440 on July 17.

ETF Exposure

Taiwan Semiconductor is a heavyweight in several ETFs, meaning any significant inflows or outflows from these funds can force automatic buying or selling of the stock. Key funds include:

• Harbor International Compounders ETF (OSEA): 7.10% weight
• iShares International Dividend Active ETF (BIDD): 7.26% weight
• Pacific NoS Global EM Equity Active ETF (GEME): 9.98% weight

Technical Picture: Trend Intact, But Near-Term Weakness

Despite the recent pullback, Taiwan Semiconductor's longer-term uptrend remains intact. The stock is trading 14.8% above its 200-day simple moving average and 2.6% above its 100-day moving average. However, it sits 7.7% below its 20-day moving average and 5.1% below its 50-day moving average, signaling that near-term momentum has faded.

The 20-day moving average remains above the 50-day, and the 50-day is above the 200-day — a bullish alignment that suggests the longer-term trend is still healthy, even if the stock is consolidating.

Momentum indicators are mixed. The MACD is below its signal line, indicating buying momentum has waned. A sustained move above the 50-day moving average would improve the technical outlook. Support is near $385, while resistance sits around $450.

Price Action

Taiwan Semiconductor shares were up 1.28% at $403.45 in premarket trading Monday, according to market data.