Taiwan Semiconductor Manufacturing (TSM) Slid Over Slowing AI Demand

Diamond Hill Capital, an investment management company, released its “Long-Short Strategy” first-quarter 2025 investor letter. A copy of the letter can be downloaded here. The market was mixed in the first quarter of 2025, due to the uncertainty caused by the new administration’s avalanche of activity. However, the portfolio outperformed the Russell 1000 Index and the blended benchmark (60% Russell 1000 Index/40% Bloomberg US Treasury Bills 1-3 Month Index) in the quarter. In Q1, both long and short books generated relative tailwinds, with the short book underperforming the index, while the long book was positive, despite the index being negative. In addition, you may look at the fund’s top 5 holdings to learn about its best picks in 2025.

In its first-quarter 2025 investor letter, Diamond Hill Long-Short Strategy highlighted stocks such as Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM). Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) manufactures, packages, tests, and sells integrated circuits and other semiconductor devices. The one-month return of Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was 11.34%, and its shares gained 27.51% of their value over the last 52 weeks.  On June 20, 2025, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stock closed at $220.09 per share, with a market capitalization of $1.142 trillion.

Diamond Hill Long-Short Strategy stated the following regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q1 2025 investor letter:

“Other bottom individual contributors in Q1 included our long positions in Microsoft, Alphabet and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM). Shares of semiconductor manufacturer Taiwan Semiconductor underperformed amid concerns about slowing near-term artificial intelligence demand following two years of rapid growth. Geopolitical and tariff-related headwinds also likely pressured shares — however, we believe these concerns are temporary and maintain our constructive long-term outlook on the company.”

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is in 9th position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 187 hedge fund portfolios held Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) at the end of the first quarter, which was 186 in the previous quarter. While we acknowledge the potential of Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) and shared the list of best stocks to buy and hold for the long term. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors. While we acknowledge the potential of TSM as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.