TSMC(US:TSM) The Motley Foolยท2025-04-09 10:00Core Viewpoint - Taiwan Semiconductor Manufacturing Company (TSMC) is positioned favorably in the semiconductor industry, with a significant market share and growing demand for chips, particularly driven by artificial intelligence [1][2]. Company Overview - TSMC controls two-thirds of the foundry market, indicating its dominance in the semiconductor manufacturing sector [1]. - The company has a strong client base, including major players like Nvidia, AMD, Qualcomm, and Apple, which enhances its market position [3]. Stock Performance - Despite TSMC's robust business fundamentals, its stock price has dropped by 35% since January [2]. - The decline in stock price is viewed as a potential buying opportunity rather than a long-term decline, given TSMC's industry leadership [2]. Market Dynamics - Geopolitical tensions with China pose risks to TSMC, with concerns about potential invasions and tariffs affecting the company [4]. - TSMC's foundry market share increased by over 2 percentage points to 67% between Q3 and Q4 of 2024, reflecting its growing market strength [5]. Strategic Partnerships - TSMC has entered a joint venture with Intel, which diversifies its manufacturing base and mitigates geopolitical risks while addressing competition [6]. Financial Performance - TSMC reported a revenue of $90 billion in 2024, a 34% increase from the previous year, with a gross margin of 56% [7]. - Comprehensive income rose by 50% year-over-year, exceeding $39 billion [8]. Capital Expenditure - The company invested nearly $30 billion in property and equipment in 2024, maintaining a high level of capital expenditure to meet rising demand [9]. Valuation Metrics - TSMC's price-to-earnings (P/E) ratio has decreased from over 30 in January to 21, with a forward P/E ratio of 16, indicating continued profit growth potential [10]. Investment Consideration - The current discounted valuation of TSMC stock presents an attractive buying opportunity for investors [11][13].