Vlad Bastion
Founder of Investment Bastion, Systematic Stock Ratings & Algorithmic Portfolios
Taiwan Semiconductor remains an elite-quality compounder at a fair price despite its share price rise. Per @KobeissiLetter, Taiwan's market cap has tripled since 2020 to $4.14 trillion, passing the UK for the first time, driven largely by TSMC, which has surged 680% and makes up over 40% of the market. x.comÂ
TSMC trades at its historical average valuation in the midst of its industry's largest investment cycle. The world's most important company is at 17.5x forward earnings, in line with its 10-year average. x.comÂ
TSMC's growth looks compelling against its valuation. Diluted GAAP EPS rose about 70% year over year and US-dollar revenue 41%; at roughly 22 times annualized earnings, guidance implies accelerating growth. TSMC expects continued demand for leading-edge processes, including its 2-nanometer ramp. 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's discounted cash flow scenario puts fair value at $389, with the stock shown as 12% below that level. The scenario assumes 30% free-cash-flow growth over the next five years, a 25x terminal multiple and a 15% required return; the valuation is labeled reasonable, with a warning to take the estimate with a grain of salt. x.comÂ
TSMC has only upside from here because even the lowest post-earnings 12-month analyst target is $440, above its $422 share price. The average target is $586.92 and the highest is $1,000. x.comÂ
TSMC isn't cheap despite its worst losing streak since 2022: it is up 67% in 12 months and 245% in five years, and trades 1.5-2x more expensive than average. It becomes a buy in the $300s, lightly at first and more heavily under $350. x.com x.comÂ
TSMC belongs in every portfolio because its growth, moat, market dominance and pricing power are unmatched, and ignoring it over China risk is a mistake. It holds about 90% of the advanced-node market, and the AI buildout keeps pulling demand toward the chips it makes best. Even assuming growth slows to 14%, gross margin eases to 63.5% and a 25x exit multiple, the stock reaches $937 by 2031, a 17.75% annual return. Risks include China, rising capex, customer concentration and hyperscaler cuts. … Show more
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's growth is constrained by capacity, so its growth rate is already known and priced in. x.comÂ
TSMC's capacity-constrained growth is holding margins through its costly 2nm ramp. Its Q4 revenue guide of $52.3-54.3B beats $49B consensus, implying 14% sequential growth, with 65-67% gross-margin guidance; planned Q4 capex is $19-23B versus $13.8B last quarter. World Trade Securities maintains Overweight and a $620 target. TSMC is also in talks to run Elon Musk's proposed Texas Terafab; additional fab and equipment demand depends on a deal. x.com x.comÂ
