Bill Brooklyn
Capital Preservation, Asymmetric Risk/Reward, Holding Winners
TSMC is the true picks-and-shovels play on AI, building a foundry moat that will take decades to bridge. It announced a $100B expansion in Arizona, bringing its US commitment to $265B, and CFO Wendell Huang said it is converting 5nm capacity to 3nm to meet demand and will not cede ground to competitors. Arizona costs are 4-5x Taiwan's, with short-term margin dilution, but 2nm now contributes revenue and AI-driven demand should outweigh the upfront capital. x.comÂ
TSMC's AI-era growth opportunity makes it an incredibly bullish investment. CEO C.C. Wei said its annualized growth opportunity is probably higher than a high-50% CAGR. x.comÂ
TSMC may lose pricing power as performance gains shift from shrinking transistors to stacking, interconnects and optics, while logic folding could make older processes competitive. Despite strong leading-edge demand, investors may overestimate the profit share its node leadership can retain. Its cautious expansion and past reluctance toward advanced packaging suggest a risk-averse culture that protects returns but could leave it late to disruptive technologies and key customers. x.comÂ
TSMC is the one company the AI chip boom cannot happen without, since every advanced chip runs through its fabs and Apple, Nvidia, AMD and Qualcomm all depend on it. Q1 profit rose 58% to a record and revenue grew 35% to $35B, with high-performance computing now 61% of sales. It is spending $52-56B on capex this year to build capacity competitors are a decade behind replicating. x.comÂ
TSMC's US expansion reduces its China risk. One of the greatest companies in the world, it has completed construction of its second Phoenix fab, per MetroPhoenix, as part of its reported $265 billion US investment. x.comÂ
TSMC's shifting cost structure is pressuring gross margin despite revenue and EPS beats. TSMC reported Q3 gross margin of 66.4%, down from 67.7% in Q2, and another decline is guided next quarter; Arizona is expected to drag gross margin by 2-4%. TSMC is checking AI data-center progress as it plans wafer capacity, while reiterating long-term AI demand strength. Price hikes may be next, given management's commitment to protect shareholder interests. x.com x.comÂ
TSMC is irreplaceable as the maker of the world's most advanced chips for Nvidia, Apple and AMD. x.comÂ
TSMC's strong AI demand is straining supply, while solid company fundamentals and attractive semiconductor valuations make an abrupt stop to its advance unlikely. TSMC's Wendell Huang expects 2026-28 capex to be significantly higher than in the previous three years to support customer growth; he says most capex is tied to long-term demand. x.comÂ
TSMC looks like it has put in a blowoff top, rising even on an announcement that it cannot afford new ASML equipment. x.comÂ
TSMC's record quarter shows chip demand is accelerating, not peaking. Q3 revenue was about $46.7 billion (NT$1.49 trillion), up 51% year over year and above both the top of TSMC's guidance and Street estimates of NT$1.46 trillion. Quarterly revenue is up about 2.4x in three years. Despite bubble fears, the AI buildout still looks early and TSMC can go much higher than people realize. x.comÂ