The new year is still young, but it has already featured a far better investing environment than 2022 was for technology investors. The tech-heavy Nasdaq Composite index has risen 3.7% so far in 2023.

Taiwan Semiconductor Manufacturing (TSM -0.70%) and Semrush Holdings (SEMR -2.92%) are also performing better so far this year. After experiencing drops of 38% and 61% last year, respectively, Taiwan Semi has jumped nearly 19% in 2023 while shares of Semrush are roughly flat.

Some analysts see an upside for both of these stocks for the rest of the year. The median price target from analysts over the past month for Taiwan Semi is $103, implying a 9% upside from the company's stock price as of this writing. Piper Sandler analyst Clarke Jefferies envisions an even better 12 months from Semrush, with a price target of $14, implying a 75% upside.

With this potential reward, should investors consider buying these growth stocks? Let's find out.

1. Taiwan Semiconductor Manufacturing

Shares of the leading chipmaker have slumped to their lowest valuation since 2016 and currently trade at a mere 13.5 times earnings. Part of this drop is due to the forecast slowdown in chip production. The semiconductor space is cyclical, and as economic activity slows, fewer things with chips get sold, and thus chips are in lower demand.

However, this predicted trend has yet to manifest for Taiwan Semiconductor. The company posted robust fourth-quarter results. Revenue soared nearly 27% year over year to $19.9 billion, but the most impressive aspect was its margin profile. The company's operating margin remained high at 52%, while its profit margin surpassed 47%. Despite the macroeconomic fears, this was the highest profit margin the company has ever seen in a single quarter, reflecting the company's current strength.

That said, this is expected to revert. Macroeconomic impacts should take hold, and CEO C.C. Wei anticipates that the first half of 2023 could be challenging. "In the first half of 2023, we expect our revenue to decline mid to high single-digit percent over the same period last year in U.S. dollar terms," he said during the Q4 earnings call. Overall, the foundry industry is predicted to decline by 3% in 2023, according to Wei, and the semiconductor market, excluding memory, is projected to fall by 4%.

The picture for 2023 looks bleak, but analysts believe most of this decline could be priced into the stock already. Investors have predicted a drop in the semiconductor space for a while, so this news is no surprise. Given the company's rock-bottom valuation, a harsh 2023 might be baked into the company's stock price. Therefore, if there is any unexpected upside, shares of Taiwan Semiconductor could be in for a healthy year. 

Additionally, the long-term future for this company continues to look incredibly bright. Taiwan Semi is a top chip producer, providing chips to fast-growing industries like high-performance cloud computing and artificial intelligence. For investors focused on investing for the long term, it is at its cheapest valuation in years.

2. Semrush

Semrush is in a far less cyclical industry, providing marketing tools to businesses to help them reach their target audiences more effectively. The Boston-based company is the dominant player in this space, with over 50 tools and leading solutions spanning nearly a dozen marketing strategies.

Semrush got clobbered last year because of its presence in Russia. The majority of its workforce was in that country, but after Russia invaded Ukraine, Semrush was quick to relocate those employees. This was expensive, and it's expected to take a $10.5 million hit to the bottom line in 2022 from the costs of shuttering its Russia-based operations. As a result, cash flow tumbled. In the first nine months of 2021, Semrush generated nearly $16.8 million in free cash flow, but during the same period in 2022, it burned $5.3 million. 

What Clarke Jefferies and others might realize, however, is that these relocation costs are one-time expenses. Therefore, Semrush should see profitability and cash generation rebound sharply in 2023 as it no longer needs to spend cash on relocation costs. While it might not achieve full profitability in 2023 considering the company has only been profitable during one quarter of its life as a public company, it will likely be a far better year than 2022.

With its business continuing to gain adoption and profit likely to reemerge in 2023, buying shares of this top dog at its lowest valuation since it came public could be a smart, long-term move.