Buy Taiwan Semi Stock After AI Fuels Strong Q4 Results & Guidance?

Core Viewpoint - Taiwan Semiconductor (TSM) stock reached an all-time high of $345 per share following record Q4 results and optimistic guidance regarding AI demand [1] Group 1: Q4 Results - Taiwan Semiconductor reported record Q4 sales of $33.71 billion, a 25% increase from $26.88 billion in the same quarter last year, surpassing estimates of $33.26 billion by 1% [2] - The Q4 earnings per share (EPS) peaked at $3.14, exceeding expectations of $2.82 by 11% and showing a 35% increase year-over-year [2] Group 2: Guidance and Outlook - For Q1, Taiwan Semiconductor projects revenue between $34.6 billion and $35.8 billion, above Wall Street's expectations of $33.27 billion, indicating a 24% growth [3] - The company did not provide full-year revenue guidance but indicated strong demand for AI and high-performance computing chips as the primary driver of this outlook [3] Group 3: Capital Expenditure - Taiwan Semiconductor issued a capital expenditure (CapEx) forecast of $52 billion to $56 billion, representing an increase of over 27% from the previous year's CapEx of $40.9 billion [4] Group 4: Management Insights - CEO Che-Chia Wei highlighted the substantial and genuine demand for AI, acknowledging concerns about the level of investment in AI while maintaining a positive outlook on continued demand for AI chips [5] Group 5: Return on Invested Capital - Taiwan Semiconductor boasts a return on invested capital (ROIC) of 27.6%, significantly above the 20% benchmark, indicating strong long-term shareholder value [6] Group 6: Valuation Metrics - The company has a price-to-forward sales ratio of 14X, compared to the S&P 500's 5X, which is typical for stocks benefiting from AI-driven growth [8] - Taiwan Semiconductor's forward price-to-earnings (P/E) multiple stands at 26X, close to the benchmark's 23X [8] Group 7: Market Position - Currently, Taiwan Semiconductor stock holds a Zacks Rank 3 (Hold), with potential for a buy rating and further price increases anticipated due to likely EPS revisions following strong Q4 results and a positive AI outlook [10]