Are Rising Geopolitical Tensions a Reason to Sell Taiwan Semiconductor Stock?

Given the news being reported around the world lately, one cannot blame investors for being nervous about Taiwan Semiconductor Manufacturing (NYSE: TSM) stock.
With the U.S. focused on Iran and saying it will help determine who is in charge there and the tension it is creating in that part of the world, it reminds some investors of the tensions going on between Taiwan and China over who is actually in charge of Taiwan. This is concerning because TSMC produces over 90% of the world's most advanced semiconductors, and most of that production takes place in Taiwan.
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Now, the question for investors is whether they should sell TSMC stock. Let's take a closer look to see if the situation has changed.
TSMC's geopolitical positioning
Without question, TSMC's location has always deterred some investors. In 2022, Warren Buffett's lieutenants at Berkshire Hathaway took a position in TSMC stock, but because Buffett was fearful of its geopolitical situation, Berkshire reversed this decision within a few months.
Moreover, TSMC stock had traded at a discount in past years amid that fear. Still, that has changed over time as its P/E ratio of 31 is well above its five-year average of 24 and not far below the 36 earnings multiple of Nvidia, one of its top clients.
Furthermore, China made up only 9% of TSMC's revenue in 2025, well below the 74% coming from North America. Thus, having TSMC out of the picture might look like a strategic advantage to China from that standpoint, and that could partially explain the dip in the stock since the beginning of March.
Do not panic yet
However, the company expects more good times in 2026, indicating that investors have good reason not to sell immediately. China also lacks the capability to produce these more advanced semiconductors. Hence, it still needs TSMC if it wants to advance its own technology.
Also, if not for Taiwan's security, that technical lead would make TSMC one of the safest stocks in existence. Investors should note that even with the risks, it generated over $122 billion in revenue in 2025, a 32% increase from year-ago levels.
Additionally, the international community has not abandoned Taiwan. Despite the U.S.'s focus on Iran, the U.S. Navy has maintained a presence in the Taiwan Strait.
Consequently, the prediction market Polymarket estimates a 16% chance of a military clash between Taiwan and China this year. It might surprise investors that this is virtually unchanged since the beginning of March, when the Iran conflict began, a strong indication that it is business as usual for TSMC.