10 Reasons to Buy and Hold This Incredible Chip Stock Forever

Core Viewpoint - Long-term investing in Taiwan Semiconductor Manufacturing (TSMC) is recommended due to its strong market position, continuous innovation, and substantial growth potential. Group 1: Company Strengths - TSMC is the world's leading contract chip manufacturer with a strong client base including major companies like Nvidia and Apple, making it difficult for clients to replace TSMC as a supplier [3] - The company has a culture of continuous innovation, with upcoming launches of 2 nanometer chips later this year and 1.6 nanometer chips in 2026, positioning TSMC as a leader in advanced technology [4] - TSMC achieves high chip yields of 90% or greater, significantly outperforming competitors who struggle with yields around 50%, which enhances its competitive edge [5] Group 2: Risk Mitigation - TSMC is diversifying its production facilities globally, investing $165 billion in the U.S. and establishing facilities in Japan and Germany to reduce risks associated with its proximity to mainland China [6] - The potential threat from China is mitigated by TSMC's global customer base, making a market crash unlikely in the event of geopolitical tensions [7] Group 3: Growth Projections - TSMC's management anticipates a 45% compound annual growth rate (CAGR) in AI-related revenue and nearly 20% CAGR in total revenue over the next five years, indicating strong growth prospects [8] - The long-term outlook remains positive due to the increasing demand for technology, ensuring continued demand for TSMC's chips [9] Group 4: Financial Performance - TSMC consistently achieves profit margins greater than 40%, resulting in substantial cash flows for reinvestment, stock repurchase, or dividends [10][12] - The company offers a solid dividend yield of 1.2%, which has been consistently increased over the years, contributing to the investment thesis [13][15] - TSMC's stock is trading at 24.9 times forward earnings, which is comparable to the broader market's 23.2 times, making it a fair investment given its growth potential [16][18]