View of the Tainan Science Park in Taiwan, Asia. BING-JHEN HONG Last week, Taiwan Semiconductor Manufacturing (NYSE:TSM) (OTC:TSMWF), also known as TSMC, released its June revenue report. The company reported NT$207 billion in revenue for the month. This Taiwan Dollar sum works out to $6.5 billion in U.S. dollars, assuming that the average exchange rate during the quarter was the same as today’s exchange rate. TSMC has not reported an official U.S. dollar figure for the month yet. The fact that we now hav ...

Taiwan Semiconductor Manufacturing stands to benefit from booming demand in AI chips.One of the biggest catalysts in the artificial intelligence (AI) movement is semiconductors. Highly specialized chips called graphics processing units (GPUs) are used for a variety of AI-powered applications including training large language models and autonomous driving.Nvidia has emerged as the de facto leader in generative AI chips thanks to its A100, H100, and new Blackwell series GPUs. Since the beginning of the year, ...

Group 1: Investment Opportunity - Taiwan Semiconductor Manufacturing (TSMC) is positioned as a strong investment alternative to Nvidia, benefiting from the same AI-driven market trends while being more diversified [1] - TSMC is the world's largest contract chip manufacturer, continuously innovating and adapting its technology to maintain a competitive edge [2] Group 2: Technological Advancements - TSMC's recent introduction of 3nm chips has already contributed 9% to its revenue in Q3 2024, despite only starting production in Q3 2023 [2] - The company is already developing 2nm chips, expected to launch in 2025, with demand for these chips reportedly exceeding that of previous generations [3] Group 3: Revenue Growth Projections - TSMC anticipates a 50% compounded annual growth rate in AI-related chip revenue over the next five years, which could account for over 20% of its total revenue [3] - Apple has been a significant customer for TSMC, contributing 25% of total revenue in 2023, and the launch of new features is expected to drive an upgrade cycle benefiting TSMC [4] Group 4: Valuation and Earnings - TSMC's stock valuation has increased, trading at 15 times forward earnings entering 2024, but remains more attractive compared to Nvidia's 47 times forward earnings [5][6] - Analysts project a 22% increase in earnings per share (EPS) for 2024 and 26% for 2025, indicating that TSMC's growth will support its valuation [6]

Company Performance - TSMC's stock closed at $187.34, reflecting a +1.54% increase from the previous day, outperforming the S&P 500's gain of 0.55% [1] - The stock has appreciated by 6.7% over the past month, surpassing the Computer and Technology sector's gain of 5.73% and the S&P 500's gain of 4.28% [1] - The upcoming earnings report on July 18, 2024, is expected to show an EPS of $1.37, indicating a 20.18% growth year-over-year, with projected quarterly revenue of $20.2 billion, up 28.86% from the previous year [1] Annual Forecast - Zacks Consensus Estimates predict TSMC will report earnings of $6.16 per share and revenue of $85.12 billion for the year, reflecting increases of +18.92% and +22.83% respectively compared to the prior year [2] - Recent revisions to analyst forecasts for TSMC are important as they indicate short-term business trends and can influence stock price performance [2] Valuation Metrics - TSMC currently has a Forward P/E ratio of 29.93, which aligns with the industry average [3] - The company holds a PEG ratio of 1.18, consistent with the Semiconductor - Circuit Foundry industry's average PEG ratio of 1.18 [3] Industry Overview - The Semiconductor - Circuit Foundry industry is part of the Computer and Technology sector and holds a Zacks Industry Rank of 3, placing it in the top 2% of over 250 industries [4] - The Zacks Industry Rank is based on the average Zacks Rank of individual stocks, indicating that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [4]

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, with the aim of buying high and selling higher, leveraging established price movements for profitable trades [1] Company Overview: TSMC (TSM) - TSMC currently holds a Momentum Style Score of A, indicating strong momentum characteristics [1] - TSMC has a Zacks Rank of 2 (Buy), which is associated with a historical outperformance in the market [2] Price Performance - TSM shares have increased by 5.86% over the past week, matching the performance of the Zacks Semiconductor - Circuit Foundry industry [3] - Over the last month, TSMC's stock price rose by 6.7%, consistent with the industry's performance [3] - In the past quarter, TSMC shares have surged by 39.49%, and over the last year, they have risen by 74.77%, significantly outperforming the S&P 500, which increased by 7.78% and 27.35% respectively [3] Trading Volume - TSMC's average 20-day trading volume is 14,940,246 shares, which serves as a bullish indicator when combined with rising stock prices [3] Earnings Outlook - In the last two months, TSMC has seen 2 upward earnings estimate revisions for the full year, with no downward revisions, raising the consensus estimate from $6.10 to $6.16 [4] - For the next fiscal year, 3 estimates have been revised upwards, with no downward revisions during the same period [4] Conclusion - TSMC is positioned as a 2 (Buy) stock with a Momentum Score of A, making it a strong candidate for near-term investment opportunities [5]

Core Insights - The article discusses the investment position of Parkev Tatevosian, CFA, and his affiliation with The Motley Fool, highlighting the company's recommendation of Taiwan Semiconductor Manufacturing [1] Company and Industry Summary - Parkev Tatevosian has no personal investment in the stocks mentioned, indicating a potential focus on unbiased analysis [1] - The Motley Fool holds positions in and recommends Taiwan Semiconductor Manufacturing, suggesting confidence in the company's future performance [1] - There is a disclosure policy in place by The Motley Fool, which may affect the perception of the recommendations provided [1]

Core Viewpoint - TSMC shares have shown significant growth, with a 6.7% increase over the past month and a 77.4% rise since the beginning of the year, outperforming both the Zacks Computer and Technology sector and the Zacks Semiconductor - Circuit Foundry industry [1] Financial Performance - TSMC has consistently exceeded earnings expectations, reporting an EPS of $1.38 against a consensus estimate of $1.29 in its last earnings report [2] - For the current fiscal year, TSMC is projected to achieve earnings of $6.16 per share on revenues of $85.12 billion, reflecting an 18.92% increase in EPS and a 22.83% increase in revenues [2] - The next fiscal year forecasts earnings of $7.91 per share on revenues of $103.84 billion, indicating year-over-year changes of 28.34% and 21.99%, respectively [2] Valuation Metrics - TSMC's stock trades at 29.9X current fiscal year EPS estimates, aligning with the peer industry average [4] - On a trailing cash flow basis, the stock also trades at 21.6X, consistent with its peer group's average [4] - The company has a PEG ratio of 1.18, which does not place it among the top tier of stocks from a value perspective [4] Zacks Rank - TSMC holds a Zacks Rank of 2 (Buy), supported by rising earnings estimates [5] - The stock meets the criteria for selection, as it carries a Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, suggesting potential for further growth in the near term [5]

Core Viewpoint - Taiwan Semiconductor Manufacturing Company (TSMC) is experiencing significant sales growth, with a projected 40% year-over-year increase in Q2 2024, indicating strong momentum ahead of its earnings report [1][6][12] Sales Performance - TSMC's net sales for June reached NT$207.87 million, contributing to total Q2 2024 sales of NT$673.51 million, reflecting a year-over-year growth rate of 32.9% for June and 40.1% for the quarter [5][7] - The company has seen four consecutive months of sales growth exceeding 30% [5] - In Q1 2024, TSMC's net sales were NT$592.64 million, with a quarter-over-quarter decrease of 5.3% attributed to seasonal smartphone demand [5][6] Revenue Breakdown - High-performance computing (HPC) is the largest contributor to TSMC's sales, accounting for 46% of net sales in Q1 2024, up from 43% in Q4 2023 [2][3] - The 5 nanometer process technologies are crucial for TSMC, representing 56% of net sales in Q1 2024, primarily used for AI chips [4] Market Expectations - Analysts expect TSMC's earnings per share (EPS) to be $1.41 for Q2 2024, reflecting a year-over-year growth of 24% [8][9] - The market may adjust profit estimates upward due to TSMC's robust sales growth and the ongoing AI boom, potentially driving the stock to new highs [8][12] Competitive Positioning - TSMC's valuation is currently at a profit multiple of 23.8x, based on anticipated profit growth of 26% year-over-year [9] - Comparatively, Nvidia Corp. is valued at 36.5x with a projected profit growth of 36%, while Micron Technology is expected to see a staggering 780% profit growth next year [10]

Group 1: Market Focus - The technology sector, particularly stocks related to artificial intelligence, is currently attracting significant investor attention [1] - Investors are encouraged to explore the VanEck Semiconductor ETF to refine their stock selections [1] Group 2: Company Performance - Taiwan Semiconductor Manufacturing (TSM) shares have reached an all-time high, driven by a double-digit revenue increase [2] - TSM reported a 40% year-over-year revenue increase, indicating strong financial momentum [6] - Analysts at Susquehanna have raised TSM's price target to $250, suggesting a potential upside of 33% from current levels [6] Group 3: Government Support and Industry Dynamics - The U.S. government has allocated up to $6.6 billion to TSM for establishing semiconductor factories in states like Arizona and Ohio [4] - TSM is a key supplier for major technology companies, including Apple and NVIDIA, which enhances its market position [4] - The geopolitical landscape, particularly U.S.-China relations, has raised concerns about tariffs and embargoes affecting TSM [4][8] Group 4: Investment Trends - Institutional investments in TSM have reached $71.2 billion over the past year, reflecting strong confidence in the stock [9] - TSM's P/E ratio stands at 30.8, significantly lower than NVIDIA's 50.0, despite similar projected EPS growth rates [8]

Core Insights - TSMC's stock has seen a modest increase, with a 2.3% rise reported on a recent Wednesday morning [1] - The company reported a 10% decline in June 2024 revenue compared to May, but a significant year-over-year increase of nearly 33% [1] - For the first half of 2024, TSMC's sales are up 28% compared to the same period in 2023 [1] Revenue Performance - TSMC generated approximately $38.8 billion in revenue during the first six months of 2024, achieving about 46% of analysts' revenue forecasts for the full year [2] - If the current revenue growth rate continues, TSMC is likely to meet or exceed analyst revenue expectations [2] Earnings Outlook - Consensus forecasts suggest TSMC will earn about $6.35 per share by the end of fiscal 2024, indicating a valuation of nearly 30 times earnings [3] - The company's modest dividend yield of 1.3% slightly improves the valuation perspective [3] - Despite a 77% increase in stock price over the past year, which outpaces the S&P 500's growth, the potential for significant future gains may be limited [3]