Taiwan Semiconductor is a major player in the global chip trade. And the one-year-old fund TSMY is trading derivatives on TSM stock to produce eye-popping dividends. Does one of these securities deserve a place in your portfolio? Let’s find out.
Overview of TSM Stock
Taiwan Semiconductor Manufacturing Company Limited is the world’s largest dedicated chip foundry, which has a global market share of nearly 65%. The company manufactures semiconductors under contract for clients, including the world’s largest tech companies.
TSM is the ticker for Taiwan Semiconductor’s ADR. An ADR or American depository receipt is a U.S.-traded stock that represents a foreign company’s equity. ADRs generally have the same rights as the original stock. If the TSM ADR were not listed on the New York Stock Exchange, interested investors could only buy equity in the company by purchasing ticker 2330 on the Taiwan Stock Exchange.
Overview of TSMY ETF
TSMY is an actively managed ETF by YieldMax ETFs. TSMY buys and sells options on TSM stock to produce income and realize limited gains when TSM stock appreciates. The fund does not invest in TSM or 2330 stock directly.
Options give the holder the right to buy (call option) or sell (put option) a security at a certain price within a specified timeframe. TSMY’s options strategy is complex. It involves selling call options without owning the underlying security. Instead of owning TSM directly, the fund uses other financial contracts to replicate TSM price movements. Additionally, the fund uses U.S. Treasury securities for collateral and additional income.
TSM Vs. TSMY: Side-by-Side Comparison
TSM and TSMY are fundamentally different assets. The table below highlights some key differences.
Security Type
TSM stock represents a direct equity position in chipmaker Taiwan Semiconductor. When you own the stock, you own a slice of the company—including future profits and dividends.
Owning TSMY provides no ownership position in TSM or any right to TSM dividends. Instead, the fund provides indirect TSM exposure through options contracts. These contracts are designed to provide income and create limited gains when TSM stock appreciates.
Risk Profile
TSM comes with the usual risks of stock ownership. Your position can lose value or stop producing dividend income without warning. This stock has a beta of 1.2, meaning it is 20% more volatile than the overall market.
TSMY has the same risks, but with an added dimension of complexity. Options trading is inherently risky because it creates leverage—meaning you can participate in a stock’s price changes with less capital than what’s required to own the stock directly. With leverage, you can lose or gain more than you’ve invested.
TSMY manages the risk with layers of options to isolate its exposure. One outcome is that larger gains from TSM may not fully flow through to the fund. More specifically, if the stock appreciates enough, the fund will have losses on its short positions that limit the upside for shareholders.
Total Return and Dividend Yield
TSM stock has gained 43.7% over the past year. Including the modest dividend yield of 0.9%, the total return was 45%. TSM has also appreciated 213.4% over the past five years.
TSMY was launched in August 2024. Since inception, the share price has declined 27.2% or $5.87. The fund has paid $8.27 in dividends, however. That nets to a total return of about 11.1%.
TSM And TSMY Valuation Analysis
TSM’s current P/E ratio is 28.15, which is down from its 2024 P/E of 31.16 and higher than its five-year average of 22.64. All three values compare favorably to the average industry P/E of 55.72, which considers 67 stocks in the semiconductor space.
Note that TSM manufactures chips, while other semiconductor companies like Nvidia outsource this function, often to TSM. The foundry business is more capital-intensive, and therefore riskier, than fabless chip design—so their P/E ratios aren’t wholly comparable.
TSMY’s net asset value per share is $15.89, and its share price is $15.77. In other words, the fund trades at a slight discount to the value of its assets.
Factors Which Influence Taiwan Semiconductor Stocks
Taiwan Semiconductor stock is prone to double-digit swings in short timeframes. For example, between January and March of 2025, TSM stock fell 17.4%. And since the end of March, the stock has gained 37.6%.
The volatility is a function of several factors, including global chip demand, high-speed computing trends, supply chain factors and evolving global trade policies.
Global Chip Demand
Global chip demand directly affects TSM, since it is the dominant market-share leader in semiconductors. Projections for the industry in 2025 and beyond continue to be optimistic. Deloitte predicted $697 billion in global chip sales this year, with the potential for $1 trillion by 2030.
AI, 5G And Other Computing Trends
AI is the most talked-about driver of global chip demand because the world’s largest tech companies are racing to build out their high-performance computing power. But semiconductors are an integral part of several high-profile industries, including 5G communications, autonomous driving, fintech, cybersecurity, cryptocurrency, healthcare and manufacturing. While the pace of the AI buildout could slow, ongoing demand from other industries will continue.
Supply Chain Resilience
The semiconductor supply chain involves chip foundries, chip designers and providers of machinery, tooling, test equipment and raw materials. These players are located all over the world, so there is also a heavy logistics component in this space.
Meeting the increasing demand for semiconductors requires efficient collaboration throughout the supply chain. Historically, supply chain issues have been disruptive. For example, pandemic-related supply problems prompted a global chip shortage in 2020.
The outlook on the semiconductor value chain remains mixed. In 2024, Boston Consulting Group reported on increased resilience fueled by pro-innovation policies in several countries and geographic diversification. More recently, Graham Scott, vice president of global procurement at Jabil, had a less positive view—noting the potential for “significant disruptions to the global supply chain.”
Global Trade Tensions
U.S. President Donald Trump is currently reshaping global trade with an aggressive tariff agenda. How the new levy structure will affect the complex semiconductor supply chain is still unknown.
Issues to watch include the new 50% tariff on copper and U.S.-China trade negotiations. Copper is used extensively in chip fabrication. And China supplies 95% of gallium and germanium, two raw materials necessary for certain semiconductors, according to McKinsey.
Expert Analyst Opinions
Four covering analysts currently rate TSM a buy. The consensus price target is $258.33, which implies almost 7% upside from the current price of $241.47. Since June 1, analysts from Susquehanna and Barclays have raised their TSM price targets.
Morningstar, the leading provider of fund ratings, does not cover or rate TSMY. However, Morningstar rates TSMY’s parent, YieldMax ETFs, as below average. The rating commentary notes, “YieldMax ETFs has not been able to demonstrate that it has a unique value proposition over other asset managers.”
Which Stock Fits Your Investment Strategy?
If your strategy involves increasing your semiconductor exposure, opt for TSM. It provides direct semiconductor exposure in a familiar equity package.
If you’re interested in growing your income portfolio, there are many other income funds with more diversification and less risk than TSMY. TSMY’s distribution yield is impressive, but that yield is less meaningful when it accompanies a per-share price decline. TSMY’s net result so far has been a good, but not great, total return.
Bottom Line
TSM is a top semiconductor stock, and TSMY is an options fund that doesn’t directly own equity in TSM or any other company. Unless you have a spot in your portfolio earmarked for income-producing derivatives, TSMY is likely too risky. TSM, on the other hand, may fit in your holdings if you can accept the risks and volatility of the semiconductor space. For more investing ideas, see best stocks for 2025.