Taiwan Semiconductor Has A Lofty Valuation With Risks

The Value Portfolio
Investing Group Leader

Summary

  • TSMC has cemented its global leadership in advanced chip manufacturing, driving strong revenue and profit growth amid surging AI demand.
  • Despite impressive financials, TSMC's valuation is lofty, with a low free cash flow yield and heavy capital expenditure requirements.
  • Rising competition from Intel and Samsung, especially with U.S. manufacturing ambitions, poses significant margin and market share risks.
  • While TSMC's dominance in cutting-edge silicon is a key strength, unpredictable AI demand and competitive threats make the stock a poor investment at current levels.
selective focus of microchip in hands of scientist wearing latex gloves and googles isolated on grey

LightFieldStudios/iStock via Getty Images

Taiwan Semiconductor Manufacturing Company (NYSE:TSM) (OTC:TSMWF) has become the fab for the world, approaching a $1 trillion valuation, as Samsung and Intel have fallen behind. We last recommended against investing in the company, arguing that competition

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This article was written by

The Value Portfolio
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The Value Portfolio specializes in building retirement portfolios and utilizes a fact-based research strategy to identify investments. This includes extensive readings of 10Ks, analyst commentary, market reports, and investor presentations. He invests real money in the stocks he recommends.

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Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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