Prediction: Taiwan Semiconductor's Stock Will Soar on July 17

Since late June, there has been a modest drawdown in artificial intelligence (AI) stocks. Taiwan Semiconductor Manufacturing (NYSE: TSM) hasn't been as affected by the pullback as some stocks, but it is still down nearly 8% from its all-time high. However, there's an upcoming catalyst that could send shares rocketing higher.

TSMC, as it is also known, reports second-quarter results after the market close on July 16, which could send the stock soaring on July 17. If you have failed to purchase shares of Taiwan Semiconductor in the past, now could be the perfect time to take advantage of the sale price, because the stock could go far higher.

Image source: The Motley Fool.

Chip demand is still growing

TSMC is the world's largest chip foundry by revenue. It has built its business on its best-in-class manufacturing and technology, and has become the go-to partner for fabricating chip designs. It has become so popular that TSMC often handles production of components for what some might consider rivals, such as making chips for Advanced Micro Devices and Nvidia. TSMC doesn't really care who the ultimate winner is in the AI build-out; as long as more chips are purchased, it's content. So, when a company like Nvidia projects that AI hyperscaler capital expenditures will rise from $650 billion in 2026 to $1 trillion in 2027, it bodes well for the stock.

But what will TSMC say on July 16 that will send the stock soaring?

It likely won't say anything too groundbreaking, but it may calm a bit of the storm that's going on in the marketplace. Right now, there are fears of overspending and that AI hyperscalers could cut back. TSMC will likely say that business is still strong and growing, and that it cannot meet client demand. That will convey a "business as usual" message, potentially helping to turn the market around.

That's all that's needed from TSMC, and other earnings reports from the AI hyperscalers later in July should help calm market sentiment, unless one of the hyperscalers pivots and informs investors that they are cutting back AI data center expenses (which would be a major shift in messaging).

As for valuation, TSMC isn't the cheapest stock in the world at 27.5 times forward earnings.

Data by YCharts.

However, investors have to pay up to own the best-in-class stocks, and TSMC certainly meets that standard. Taiwan Semiconductor is one of the most neutral ways to play the AI build-out, and I think it could be the stock that reignites the AI rally following earnings on July 16.

Keithen Drury has positions in Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.