Core Viewpoint - Taiwan Semiconductor Manufacturing Company (TSMC) is a leading player in the AI-powered growth stock sector, known for its high dividend payouts and strong market position in chip manufacturing [1][2]. Group 1: Dividend and Financial Performance - In 2023, TSMC paid $9.35 billion in dividends, with a net income of $26.6 billion, resulting in a payout ratio of approximately 35% [2]. - The dividend yield for 2023 stands at about 1.1% based on a market cap of $895 billion [2]. - Despite a 4.5% decline in revenue and a 17.5% drop in net income in 2023, TSMC increased its quarterly dividend from 3 to 3.5 Taiwanese dollars per share [2]. Group 2: Future Growth and Dividend Expectations - TSMC anticipates a strong recovery in 2024, projecting a dividend increase from 11.25 to "at least" 13.5 Taiwanese dollars per share [2]. - The recent dividend raise of 20% aligns with TSMC's long-term growth forecast of 15% to 20%, indicating a strategy of steadily increasing payouts [3]. - The company expects a turnaround in mature chip segments while continuing to benefit from the surging demand for AI chips [3].

Core Insights - The semiconductor industry, particularly companies like Taiwan Semiconductor Manufacturing Company (TSMC), is positioned to benefit significantly from the ongoing artificial intelligence (AI) boom, with the global AI market projected to generate nearly $2.6 trillion in annual revenue by 2032, up from an estimated $538 billion last year [1][6] Group 1: TSMC's Role in AI - TSMC is a key player in the AI semiconductor market, providing advanced manufacturing processes that enable companies like Nvidia to produce powerful AI chips [3][4] - TSMC's 4N and 4NP manufacturing processes are critical for Nvidia's Hopper and Blackwell AI processors, respectively, highlighting TSMC's importance in the AI chip supply chain [3][4] - A diverse range of customers, including Intel, Qualcomm, AMD, Apple, and Broadcom, rely on TSMC for chip production, indicating strong demand for TSMC's services [4][5] Group 2: Financial Performance and Growth - TSMC's revenue increased by 27% year-over-year in the first five months of 2024, a recovery from a decline in the previous year due to poor market demand [5] - The company holds a 62% market share in the foundry sector, significantly ahead of its closest competitor, Samsung, which allows TSMC to exercise pricing power [5] - TSMC plans to increase its advanced chip production capacity by 60% by 2026 to meet rising AI-related orders, further solidifying its market position [5] Group 3: Future Projections - Analysts project TSMC's earnings to grow at an annual rate of 21% over the next five years, with earnings per share expected to increase nearly 23% in 2024 and 25% in 2025 [7][9] - The AI chip market is anticipated to generate $372 billion in revenue by 2032, a substantial increase from $15 billion in 2022, indicating a long-term growth opportunity for TSMC [6] - TSMC's overall revenue could reach $180 billion by 2030, up from $69 billion in 2023, driven by the expanding AI market [9]

Company Performance - TSMC's stock closed at $173.96, reflecting a -0.81% change from the previous trading day, underperforming the S&P 500's daily loss of 0.16% [1] - Over the past month, TSMC shares gained 11.64%, outperforming the Computer and Technology sector's gain of 6.77% and the S&P 500's gain of 3.15% [1] - The upcoming earnings report is expected to show an EPS of $1.34, a 17.54% increase year-over-year, with revenue forecasted at $19.95 billion, indicating a 27.28% growth compared to the same quarter last year [1] Analyst Estimates - For the full year, Zacks Consensus Estimates project earnings of $6.13 per share and revenue of $84.52 billion, reflecting increases of +18.34% and +21.96% respectively from the previous year [2] - Recent changes to analyst estimates indicate positive sentiment regarding TSMC's business and profitability, with a direct correlation between estimate alterations and stock price performance [2] Valuation Metrics - TSMC currently has a Zacks Rank of 2 (Buy), with the Zacks Consensus EPS estimate having increased by 0.26% over the past month [3] - The company is trading at a Forward P/E ratio of 28.63, which aligns with the industry's average Forward P/E [3] - TSMC's PEG ratio stands at 1.2, consistent with the Semiconductor - Circuit Foundry industry's average PEG ratio of 1.2 [3] Industry Overview - The Semiconductor - Circuit Foundry industry is part of the Computer and Technology sector and holds a Zacks Industry Rank of 2, placing it in the top 1% of over 250 industries [4] - The Zacks Industry Rank measures the strength of industry groups, with the top 50% rated industries outperforming the bottom half by a factor of 2 to 1 [4]

Core Viewpoint - Taiwan Semiconductor Manufacturing Company (TSMC) is a critical player in the semiconductor industry, significantly powering Nvidia and the broader AI revolution, with a market capitalization of over $3.34 trillion for Nvidia [1]. Group 1: Company Overview - TSMC has established itself as a leader in chipmaking through its innovative foundry model, focusing on manufacturing expertise rather than direct sales to customers [2]. - The company has few competitors, including Intel and Samsung, and serves major clients like Apple, Alphabet, Amazon, and Nvidia [2]. Group 2: Financial Performance - TSMC's operating income has surged by nearly 300% over the past year, reaching $30 billion, with total revenue exceeding $70 billion and a 30% revenue growth reported in May due to increased AI capital spending [3]. Group 3: Market Sentiment and Risks - TSMC's stock has appreciated by 439% over the last five years, with investors optimistic about continued growth driven by the AI revolution, although concerns about a potential AI bubble exist [4]. - The company is diversifying geographically to mitigate risks associated with potential Chinese aggression, including plans to build factories in the U.S. with a $6.6 billion grant from the government [5]. Group 4: Valuation Concerns - TSMC's price-to-earnings (P/E) ratio has increased from just above 10 to nearly 35, raising questions about whether the stock is overvalued at current levels compared to the S&P 500's P/E of about 28 [7].

Core Viewpoint - Taiwan Semiconductor Manufacturing Company (TSMC) is positioned to benefit from significant demand waves in the AI sector and potential iPhone upgrade cycles, making it a compelling investment opportunity [1][8]. Group 1: AI Demand and Growth Projections - TSMC is a key player in the chip manufacturing industry, providing chips for major companies like Nvidia and AMD, and is expected to see substantial growth in AI-related revenue [3][4]. - Management forecasts a 50% compound annual growth rate (CAGR) for AI-related revenue over the next five years, predicting that AI computing will account for approximately 20% of total revenue by that time [4]. - The overall revenue growth guidance for TSMC is set at a 15% to 20% CAGR for the coming years, which is notable for a company of its size [4]. Group 2: Client Concentration and Market Opportunities - A significant portion of TSMC's revenue, approximately 25%, comes from a major client, which is identified as Apple, given its role as a supplier for iPhone chips [5][6]. - Apple's recent announcement regarding generative AI features exclusive to newer iPhone models could trigger a substantial refresh cycle, as an estimated 90% of iPhones in use are older than the iPhone 15 [5][6]. - The market's reaction to Apple's announcement saw its stock rise over 10%, while TSMC's stock only increased by about 2.5%, indicating a potential oversight by investors and an opportunity for TSMC [6][8].

Core Viewpoint - Taiwan Semiconductor Manufacturing Company (TSMC) has reached a new 1-year high driven by optimism regarding its ability to sustain top line growth and capitalize on the rising demand for AI chips, despite a 73% year-to-date gain in valuation [2][12]. Financial Performance - In Q1'24, TSMC reported a 13% increase in net revenue to $18.9 billion, surpassing its own guidance of $18.0-18.8 billion [7][10]. - Free cash flows grew over 200% year-over-year, significantly outpacing revenue growth, which increased 17% [9][11]. - The company's free cash flow margin improved to 43% in Q1'24, indicating strong operational efficiency [9][14]. Market Position - TSMC holds a dominant position in the global foundry market with a market share of 62% as of Q1'24, up from 60% in FY 2023 [5][14]. - The company is benefiting from a surge in demand for AI chips, evidenced by receiving $6.6 billion in grants from the U.S. government to boost domestic production [5][11]. Growth Catalysts - Continued acceleration in free cash flow growth is expected as demand for chips remains high and the market is currently undersupplied [11]. - TSMC's management may focus on capital returns, including stock buybacks, as free cash flows increase [11][14]. - The company is projected to grow its earnings per share (EPS) by 24% annually in the long term, supported by its strong market position and free cash flow growth [12][14]. Valuation Insights - Despite a significant rise in valuation, TSMC is considered relatively cheap based on earnings, with a forward P/E ratio of 22.6X, which is below the industry average of 26.0X [12]. - If TSMC's valuation aligns with a P/E ratio between 26.0-29.5X, its fair value could range from $207 to $235, indicating substantial revaluation potential [12].

Core Insights - The ongoing AI boom is significantly driven by advanced semiconductors, with Taiwan Semiconductor Manufacturing Company (TSM) being a key player alongside Nvidia [1] - TSM has seen a remarkable 80.43% year-to-date increase in its stock price, reaching $183.34 per share, and is expected to maintain strong performance [1] Stock Performance and Analyst Ratings - TSM has a perfect 'strong buy' score from all 11 analysts on TipRanks, indicating strong market confidence [3] - Barclays set a price target of $170 for TSM on June 5, which has since become outdated as the stock price has risen, indicating a potential 5% downside from the target [3] - The average price target for TSM is currently $170.33, with the highest target reaching $200, reflecting bullish sentiment among analysts [5] - Bank of America maintains a 'buy' rating for TSM, despite a recent price target of $180 becoming bearish due to rapid stock price changes [6] - Susquehanna raised its price target for TSM from $180 to $200, citing strong demand and expected revenue growth of 28% for 2024 [7] - Bernstein also increased its target from $150 to $200, highlighting TSM's full capacity for N3 and N5 technologies and the demand for its CoWoS technology [7]

Core Thesis - TSMC's stock is rated as a "strong buy" with a fair price estimate of $231.78, indicating a 31.5% upside from the current price of $176.23, and a potential future price of $400.85 for 2029, suggesting annual returns of 31.5% throughout that year [2][20]. Financial Performance - TSMC reported Q1 2024 earnings of $1.38 per share, beating consensus estimates by 4.51%, and revenues of $18.87 billion, exceeding expectations by 4.77% [2]. - The company's fair price estimate has slightly decreased from previous evaluations due to changes in financial conditions, but it remains significantly higher than the current stock price [19]. Market Position - TSMC holds a dominant market share of 61%, far surpassing its closest competitor, Samsung, which has an 11.3% market share [4]. - TSMC controls approximately 90% of the manufacturing of AI chips, highlighting its critical role in the semiconductor industry [4]. Growth Strategy - TSMC's growth strategy focuses on expanding and innovating its manufacturing processes to maintain its market dominance, which is essential in the capital-intensive semiconductor industry [3]. - The company is diversifying its operations outside of Taiwan to mitigate risks associated with geopolitical tensions [3]. Industry Outlook - The global semiconductor market is projected to generate revenues of $553 billion in 2023 and $736.4 billion by 2027, reflecting a compound annual growth rate (CAGR) of 6.3% [5]. - The foundry services market, specifically, was valued at $106.8 billion in 2022 and is expected to grow at an 8.1% CAGR through 2032, reaching $231.5 billion [5]. Valuation Metrics - TSMC's weighted average cost of capital (WACC) is calculated at 10.53%, with depreciation and amortization (D&A) expenses tied to revenue at 25.45% [6][7]. - The projected net income for TSMC is expected to grow significantly, reaching $104.81 billion by 2029 [13]. Future Projections - The model suggests that TSMC's stock price could reach $400.85 by 2029, translating to annual returns of 31.5% from 2024 to 2029 [20]. - The company is expected to maintain a gross margin of 54.35% and continue hiring at a rate of approximately 5,660 employees per year [10][12].

Core Viewpoint - TSMC shares have experienced significant growth, with a 16.9% increase over the past month and a 72.8% 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 $6.13 per share on revenues of $84.52 billion, reflecting an 18.34% increase in EPS and a 21.96% increase in revenues [2] - The next fiscal year forecasts earnings of $7.69 per share on revenues of $102.23 billion, indicating year-over-year changes of 25.48% and 20.96%, respectively [2] Valuation Metrics - TSMC's current valuation metrics show a trading multiple of 29.3X current fiscal year EPS estimates, aligning with the peer industry average [4] - The stock trades at 21.1X trailing cash flow, also matching the peer group's average, and has a PEG ratio of 1.23, which does not place it among the top value stocks [4] Zacks Rank - TSMC holds a Zacks Rank of 2 (Buy), supported by favorable earnings estimate revisions from analysts [5] - The stock's Value Score is C, while its Growth and Momentum Scores are both B, resulting in a combined VGM Score of B, indicating potential for future performance [3][5]

TSMC isn't a cheap stock -- but it's probably not going to get much cheaper than this for the next couple of years.Taiwan Semiconductor Manufacturing (TSM 2.09%) stock was up 2.1% through 2 p.m. ET Tuesday. As hometown daily paper DigiTimes reported this morning, Intel has tapped TSMC to manufacture its new line of 3nm semiconductor chips for notebook computers.What's more, production of the chips is already commencing. What it means for Intel... and for TSMCThis sounds like good news for Intel... and for T ...