TSMC's Supercycle Is Just Warming Up

Core Insights - Taiwan Semiconductor Manufacturing Company Limited (TSMC) has underperformed the market with a return of negative 18% since the last coverage, highlighting its critical role in AI chip manufacturing [1] Company Analysis - TSMC is essential for AI, manufacturing chips that power various applications, indicating its strategic importance in the technology sector [1] - The company demonstrates a proven track record in scaling businesses, smart capital allocation, and insider ownership, which are key indicators of effective management [1] - TSMC maintains consistent revenue growth and provides credible guidance, reflecting its operational stability [1] Market Positioning - TSMC possesses a strong technology moat and first-mover advantage, which are crucial for maintaining competitive positioning in the semiconductor industry [1] - The company benefits from network effects that drive exponential growth, particularly in high-growth industries [1] Financial Health - TSMC shows sustainable revenue growth with efficient cash flow, indicating robust financial health [1] - The company has a strong balance sheet and a long-term survival runway, which are essential for navigating market challenges [1] - TSMC avoids excessive dilution and financial weakness, further strengthening its financial position [1] Investment Methodology - The investment approach focuses on identifying high-conviction opportunities with a strong margin of safety to protect against capital impairment while maximizing long-term compounding [1] - Portfolio construction includes core positions (50-70%) in high-confidence, stable plays, growth bets (20-40%) in high-risk, high-reward opportunities, and speculative positions (5-10%) in moonshot disruptors [1]