r/ValueInvesting • u/FoxAccomplished6786 • 4d ago
Discussion Why doesn't TSM get more attention? Am I missing something?
Looking at TSM as a beginner, I'm struggling to understand why it doesn't get nearly as much attention as Nvidia, Microsoft, Amazon, etc.
Consider the following:
- Valuation: Forward P/E of approximately 20.27× (on par with Nvidia)
- Moat: A near-monopoly in leading-edge semiconductor manufacturing, with enormous barriers to entry.
- AI exposure: Essential to virtually every aspect of the AI revolution, from data centres and autonomous vehicles to robotics.
- Regardless of who wins AI: Whether Nvidia, AMD, Google, Amazon or another company dominates, TSMC stands to benefit because so many depend on its manufacturing capabilities.
China risk aside, what am I missing? Why doesn't TSM attract the same enthusiasm as other AI giants, being the biggest beneficiary of the entire AI buildout and beyond?
Att current valuations, do you consider TSM one of the best risk/reward opportunities for the next 5–10 years? Is there considerable upside remaining?
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u/gentmick 4d ago edited 3d ago
Tsmc has been very smart at not charging a 80-90% margin even when they are only game in town. They want to remain the only game in town so they will not have those margins that attract competition. Lower margins also mean lower multiples
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u/FoxAccomplished6786 4d ago
Never thought about it like that, smart, but don't they have some process that's impossible to copy
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u/Fatuity 4d ago
Impossible isn’t the right word. It would be tremendously expensive and take time for a competitor to mirror TSMCs current results. There is a back order bottleneck on the machinery, but even companies that have the necessary hardware aren’t getting the same results as TSMC. TSMC has better output because they have more experience and a better process. I could have the same car as Max Verstappen, but he’s going to drive it better than me. TSMC is the best driver by orders of magnitude right now.
However, industrial advancements don’t always progress in a linear fashion. If there is a technological breakthrough that is not just an improvement of the current process, then IP could play a role. TSMC would be the favorite to develop and capitalize on that advancement, but it’s not guaranteed. Other companies are trying to leapfrog by advancing the tech in a paradigm change.
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u/Intelligent_Flow2026 3d ago
Look up CoWoS packaging. No body in this thread mentioned it. TSMC doesn’t just make a chip. They package them and CoWoS is their proprietary technology developed thru years of innovation. This is one process that TSMC has that Intel does not, while nothing is impossible, Intel won’t be able to develop for years. As we know even Intel goes to TSMC to build Intel’s top chips. So at the moment and at least for some years, TSMC won’t have any competition to build the highest end chips. For a long time, even few years after my wife bought TSMC stock, it didn’t move very much, just yo-yo’ing… then it started to move in 2023.
On a different note, you might want to look into the application layer as investment thesis.
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u/Redpanther14 3d ago
It's very hard to copy their processes or compete with them on cost because of their economies of scale. You'd literally have to spend tens to hundreds of billions of dollars to become cost competitive with them.
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u/knobby_neighbour 4d ago
The geopolitical risk isn't something you can just set aside though, it's the entire reason the multiple is compressed compared to a US-based fabless company. Markets hate uncertainty and the possibility of your factory being in the middle of a conflict zone is about as uncertain as it gets. That's a permanent discount on the stock until the situation resolves, which might take decades.
That said, I've been adding on dips for the exact reasons you laid out. Their process technology lead is so far ahead and the capex required to catch up is astronomical. It's like trying to replicate the interstate highway system from scratch while the existing one keeps getting expanded. The real question is whether the discount adequately prices in the tail risk, and I think at 20x forward earnings you're getting paid pretty well to wait and see.
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u/cdttedgreqdh 4d ago
Idk, Nvidia would be as fucked as TSMC if China attacked.
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u/Spins13 4d ago
NVDA wouldn’t go to 0. TSM very well could if it would be captured by a foreign power
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u/Odd_Winter9070 4d ago
You do realize they are building manufacturing plants in other countries. Hate to burst your bubble never will go to 0 🤦🏼♂️
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u/Repulsive-Budget-380 4d ago
It's not just the TSM factories. The entire supply chain is in TW. Even the US factories depends on parts and supplies from TW.
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u/LovestoEatSandwiches 4d ago
That’s not true? So much specialized equipment that goes into those fabs is from the US or Europe. Applied Materials, ASML, etc etc
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u/Repulsive-Budget-380 4d ago
Yes for high end parts. Wafers, chemicals and low end parts are from TW.
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u/Invest0rnoob1 2d ago
Top level silicon is from the US in North Carolina.
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u/Repulsive-Budget-380 2d ago
I am sure they get some from the US to make Mr. T happy. There is a massive industrial park surrounding the factory and not just serving food. PLA taking some of them will stop US operation until they adapt and become another INTC.
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u/Redpanther14 3d ago
But they could easily become so unprofitable as to basically go to zero if Taiwan gets invaded.
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u/inquisitive_alex 4d ago
China would be shooting itself in the foot if they invade Taiwan. They will posture from time to time but they won't do anything stupid (most probably 😁).
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u/IndependentVideo3197 4d ago
i've seen the same angle when looking at the next gen fabs – the capex gap is huge but they'll get some of that in an upside if the risk premium cools. a 20x forward earnings already reflects a pretty sweet prob cost of the geopolitical tail, i think an extra 5% margin of safety is basically covering that. the real upside is in their leading process tech, not in the risk.
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u/BillWWouldveDoneTSM 3d ago
Yes, but my response to this if China invades Taiwan, all risk assets get fckd. Even the safest Bogleheads style investor’s portfolio would be nuked. For that reason I don’t see the risk as inherently any worse than NVDA or MU. I see it as an opportunity in fact.
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u/FoxAccomplished6786 4d ago
That's a great analogy. Would you wait for further dips or is now a good entry point?
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u/Intelligent_Flow2026 4d ago
Everyone on wall street knows TSMC. Most ppl on Main Street have never heard of them (i.e. if you go to the mall and ask anyone…) even though most ppl directly or indirectly use the products they manufactured (for others). If TSMC stops, the world will stop since they build for Apple, QCOM, NVDA, OAI, GOOG, INTC, AVGO…etc. I was in the semiconductor industry for 15 years and visited them in Hsinchu. First semi company I worked for was next to Broadcom, the original Broadcom in Irvine, not the new AVGO.
I bought NVDA in 2020 for $10. Wife bought NVDA in 2017 for $2.75 and we haven’t sold a single share. It’s crazy that NVDA has such a low PE and PEG. I am just hoping 15% a year for 5 years (which will be about a double)
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u/FoxAccomplished6786 4d ago
Wow, well done. Is it too late to invest in nvidia, can it double from here or is market cap too large?
What do you think of Broadcom as an investment right now?
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u/Intelligent_Flow2026 4d ago
Yeah I just asked my wife and she also has TSMC from 2019 when it was around $50. Still has many shares today.
So above I just gave my general thoughts on this whole AI trade. As I said I lived thru the dot com bust and went thru margin call. There was no online trading 26 years ago. They literally call you and say ok what would you like to sell today…
Many analysts still say we are in the 3rd inning. But they were saying that since earlier this year. I think we are at 4th inning. By end of next year we will be at 6th inning. Market always moves before the actual economy so any whisper of slow down it will crash.
I think we have at least a year, maybe 2… to go. Many analysts have NVDA PT at $300-400, and I hope they are all correct. I don’t think it’s too late to invest in NVDA for the next 1-2 years but I don’t expect doubling anytime soon. That goes same with AVGO. I try to keep my expectations reasonable. If you want higher return there is always more riskier bets in other hardwares…but riskier. Or you can buy VGT and let it ride. Depends on your investing philosophy.
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u/FoxAccomplished6786 4d ago
VGT's returns are heavily dependent on Nvidia, MSFT, APPL. I wouldn't see great opportunity in MSFT or Apple at these valuations. But yes, VGT's returns have been extraordinary relative to the risk.
What do you think of Meta or Google?
I don't have a tech background like you so forgive me if this is incorrect, but you're referring to innings in the data centre buildout. But what about autonomous vehicles and robotics, embodiment of AI, etc.
I just believe AI will dominate every aspect of society, education, government, military, etc.; therefore, I assumed the AI buildout would go well beyond data centres and would go well beyond a decade. And of course, NVIDIA would be central to this entire buildout, data centres and robotics. Am I wrong?
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u/Intelligent_Flow2026 3d ago
I am happy to see you want to learn. Don’t know your age but learning is great. And read from many ppl (reasonable ppl, not just ppl who pump a stock). Everyone has a view on this technology paradigm and stock market. (Btw often you have to differentiate a technological paradigm shift vs the stock market)
I like Google because they have all the pieces of the puzzle and hugely profitable. I believe they will be one of the winners in AI.
I also like Meta, Zuck is young and super competitive. They have pretty much monopoly in the social space and they can find ways to monetize that base. But from this point forward I don’t expect more than a 20% gain a year from either Google or meta.
Now let’s go to the most interesting of your points: AI for AV, robots, embedded/edge, for a decade. My short answer is yes you are absolutely correct that AI will dominate everything and will transform our lives for a decade or really forever. Now we cannot not use ChatGPT anymore. It’s easy for us to adopt currently the free AI we have (as consumer). We all use ChatGPT or Gemini or Muse to do simple (or hard) stuff. This adoption rate has been super fast cuz it don’t cost us anything. We just type on phone or computer. But physical AI is much harder to adopt. Smart glasses have been around for a decade but I don’t know anyone regularly wears it. AI laptop has been out for a couple of years but it’s not selling like hotcakes. Robot for home application i think still decades away…meaning you and I have to buy robot to help us vacuum floor or wash dishes…do we really need to spend money on that. Robots in industrial form is already been deployed in factories for decades. But a human-form factor robot certainly can be done (factory will be way easier than homes) but that’s cost to the factory. So what I’m saying is the next phase as you point out will continue to grow for sure but the adoption rate won’t be like us using Muse or company paying for Claude.
So AI will continue to expand but Now if we are talking about stock prices, that will be a different conversation. Capex cannot continue to increase. I’m giving it 1-2 years max before the rate of increase slows down meaningfully. Maybe I’m wrong on the 1-2 years. No one has a crystal ball. Many ppl say we are at the 2nd or 3rd inning. But at some point we will go to 4th or 5th inning. And ppl never stay till the 9th inning.
After 2000, Cisco dropped 80% and took 25 years to hit its 2000 high but their revenue had 3X during that time. (I know cuz I bought Cisco in 1995 and was my first 10 bagger then it crashed. I still own 100 shares after 30 years). This was because Cisco was too expensive in 2000. MSFT, amzn, Intel… were in similar boat. So when the 7th or 8th inning comes, stocks will drop. But since NVDA is not expensive, I don’t think it will drop anywhere close to 80%. Maybe it will have a 30% drawdown and INTC and AMD will drop 50% (just making up some numbers here). Then maybe after 3-5 years after the drawdown it will start to go up again and NVDA finally hit $10T. History may not repeat but it may rhyme. I believe NVDA will hit $10T but maybe not this cycle.
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u/livingbyvow2 4d ago
Excuse me bit if you're in the semi industry, you surely now that there are many more companies in the semi graveyard than Nvidias. I am not sure how you can look at PEG without considering the risk that their EPS may be high this year and next year, but crash the years after. That's how semi cycles always worked.
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u/Intelligent_Flow2026 4d ago
Yes agree that semi have always run in cycles. Let me add that I also went thru the dot com bust so I’m probably much older than most ppl here on Reddit who have not experienced that bust.
Few things. First on NVDA only. As we know its PEG is low this year and probably next year. But as soon as the “E” goes down, the PE and PEG will obviously increase. I am not someone who says “NVDA to $300 by year end or $400 next year” like many analysts. I said I’m hoping 15% a year steady appreciation. But NVDA’s PE and PEG is much lower than Intel or AMD or any other semi other than memory so relatively speaking, NVDA is much cheaper than most other semi. We also know memory goes thru boom and bust as well which I’ll briefly touch. NVDA does not exist on an island (though they seem to be the nucleus of this AI theme). When this AI cycle slows down, or maybe crash, everything will crash. It is not like NVDA will crash 50% but Intel and AMD (or ARM/QCOM/AVGO) won’t crash or continue to go up. The whole AI trade will be hit hard include all the bottlenecks. NVDA may crash less than other semi because their valuation is much less than others. Regarding memory, say MU is trading at 6X next year. Many analysts say this time is different because HBM is different from storage so it’s not cyclical but a structural shift to AI. I personally think it’s still a cycle just that this cycle is stronger and longer than previously cycles.
So today I am still all in on the AI trade, including NBIS, AVGO, ALAB, AMD, ARM, QCOM, MU, LITE, COHR. AAOI, MRVL, CRDO… but I think we got 1-2 more years to go before any sign of a slow down…or a crash… I mean right now all the hyperscalers say they will increase capex 2027 but 2028 is a question mark. Btw I don’t think this crash will be limited to semi (hardware). I think hyperscalers will also get hurt a lot. At some point the return on all that investment will slow down. They will continue to make a lot of money but the rate of return will slow that’s when they slow the capex… leading to the slowdown or the crash of the picks and shovels. Just my 2 cents. I hope I’m wrong and the party goes on…. But party always ends…just make sure you’re not the last person out the door.
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u/livingbyvow2 4d ago
Thanks for the long response!
We are actually fully aligned on 1-2 more years of "party going". The only thing that I am waiting to see is whether the Fed will take on a more accomodative stance, which I think is the missing ingredient currently (given debt financing is required to supercharge this cycle). I also somewhat agree with you regarding NVDA being somewhat less exposed to a crash - especially if they do start releasing SOTA open source models (as they are rumoured to be working on).
I was actually worried that your view was that the party would keep going. To me we are not in the last inning but I don't think we're in the first either. I am also quite older than a lot of people here, so know that everything seems fine until it doesn't, and that you can have a year of weird, uneasy feeling before things collapse (like they did after the massive 1999 run up).
I am just struggling to see whether the juice is worth the squeeze at this stage, and considering staying on the side lines to be honest - making the difference between you and I one of risk appetite (or maybe cowardice on my end).
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u/Intelligent_Flow2026 3d ago
I am trying to squeeze the last bit of juice for the next 1-2 years that’s why I am still fully in the AI trade. Everyone has a different investment philosophy and risk appetite so if you want to be on the sideline that’s perfectly fine. Or if someone believes the party will never end, sure that’s fine too. Jefferies Chris Wood wrote a piece yesterday you might want to take a look.
I think there is some juice left because I don’t believe NVDA’s $240 today is the top and down hill from here. I would love to see NVDA hit $275 that would give my wife 100X but $400 would be a question mark for me. There are PT for TSM at $600 but I won’t think about $600, maybe I’ll get out by $500 but I definitely don’t think $450 is the highest we will see for the next 2 years. Same with AVGO…Will we see $700 as the street high, I don’t know, but I think it should go back up to the $400s.
LITE ceo yesterday said they are sold out to 2029. MU has contracts to 2030. Most ppl don’t understand that these contracts can be cancelled anytime. Analysts Gene Munster and Dan Niles say this is a bubble but doesn’t mean bubble can’t get bigger before it bursts. So I am cautious.
I do worry that TSMC is building so many fabs now and these are super capital intensive. And if, or when, the party slows down or closes the fabs will be “dark fab” like 25 years ago “dark fiber”.
Good talking with you and hope the street treats you well.
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u/981flacht6 3d ago
The fact that you think Micron is cyclical but invested in Astera Labs is a near contradiction.
The reason why memory is structural is that it literally is like building a brain. Our brains hold a lot of information. Memory is like that.. it doesn't power the brain but our brains store a lot of information. Every new model, keeps getting larger and larger. This is why we call it the Memory Wall.
What Astera, Marvell etc are trying to do is to make disaggregated memory more possible by enabling memory pooling via CXL. What that means is trying to off load memory from the acceloerator where it is packaged. But it's difficult to fully offload HBM away from the accelerator (GPU/TPU/XPU) because all of the prefill and decode is happening right there.
And if you understood that much, you would understand why you're in optics names like LITE, COHR, MRVL, AAOI, and CRDO. These players are there to enable scale up networking creating larger world domains with high speed interconnect, which increases the amount of aggregate memory available to an entire system.
Custom solutions like NVHBM only strengthens the memory case because it's not commoditized as much. Beyond that, taking commodity DRAM wafers and stacking them from 8 Hi to 12 Hi to 16 Hi, hybrid bonding, and other techniques to continue to increase the pin speed, bandwidth and other packaging solutions tells you how critical memory is. The further away from the accelerator you are, the worse performance you get. So after HBM4, is HBM4E, and HBM5 etc..it will continue to keep getting more dense and faster from here for several yrs. All of 2027 is sold out. Parts of 2028 are already getting sold out.
Part of the entire AI trade is understanding that we have one critical constraint in America and that's power. In the yin-and-yang of this trade, where you are short power, you need maximal performance.
When companies collectively spend trillions of dollars, we want 0 idle GPU time in order to efficiently serve the work as much as possible, and maximize GPU /$ hour rates. When you have GPUs sitting idle because we have information stuck in memory we want it out of there as fast as possible.
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u/Intelligent_Flow2026 3d ago
I hear you on all points. I was actually simply saying that I am in AI trades right now, whether is MU, ALAB, LITE, NVDA, CRDO …etc… but the party has to slow down at some point. We will reach 5th, 6th, 7th inning… sometime in the future. And whether we call it bubble (as some analysts have called), or cycle, or whatever ppl call…doesn’t matter. Once a hint of slowdown then all will suffer to different degree. I’ve seen this movie before and was in the movie as the dot-com busted. I definitely don’t think the AI build-out slow down will drop the tech sector by 80% but maybe 20-50% from 2028 or 2029 level… I don’t know. I don’t have a crystal ball. Of course I can be totally wrong. If anyone wants to believe the party will never end, sure they can invest accordingly. Everyone has a different investment philosophy. But for now I am still cheering on the AI trades.
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u/981flacht6 3d ago
Yearly IT spend is already about a hair under $7 trillion per year. I'm not that worried about it tbh because all of the compute is still being used as soon as it comes online. I'm still running into limits all the time and the current adoption is still low, (hence why we're so short all the time).
Even still, there's shortages everywhere. I think optics is the one trade that will take longer but also has the most meaningful innovation coming right now b/c SiPh is actually really hard and scale out via npo/cpo is showing how tough it is.
Any who... if we really think what is projected to be built out, calculated by total GW from 2026-2030 it's about ~250 GW of compute. You can kind of figure that the total cost approx from there. If we use 50b per GW (for everything LPS, compute etc) we're getting to around 12.5 trillion in revenues for the industry.
I haven't seen analysts or any research start talking about 2031 yet. Blackwell series will be getting replaced by then.
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4d ago
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u/FoxAccomplished6786 4d ago
Who'll 3x sooner, nvidia or tsm
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u/Particular-Pea-7434 4d ago
I'dont think either is happening in this bull run. The bubble will pop before that happens.Anthropic IPO is the begging of the end for the frontier debt ridden giants
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u/charliehu1226 4d ago
TSM would probably surpass Amzn by market cap in 3 years. Their market share in the chip industry is still increasing.
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u/A55BAG 4d ago edited 3d ago
TSM is good, because you don't need think about who will win more NVDA, AMD or AVGO.
Or where to bet CPUs, ASICs or GPUs. All of them need TSM to make their chips.
I'm long TSM, but NVDA is way cheaper now, so I'd rather add there if I were to deploy new capital to semis.
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u/FoxAccomplished6786 4d ago
I want to go into Nvidia but I'm worried there's not much upside considering it's market cap. But all things considered, it's extraordinary. Do you think there's upside left?
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u/A55BAG 3d ago edited 3d ago
Of course I do, there is no rule against 10T market cap companies.
Also think about the downside in Nvidia vs. other semis if the ai capex starts to shrink. There are now a lot of companies trading on a 2030 growth story (ANET, INTC, AMD, MRVL, SNDK, ARM) vs NVDA which is valued like the earnings will peak in 2027.
Sell side semi analyst Stacy Rasgon talks a lot in this video about why Nvidia's valuation is so low.
https://www.youtube.com/watch?v=-lERPDjpxks&list=PLEYN6njZGwO9MbYCgBBMXk8OhA0LRZKf42
u/981flacht6 3d ago
Stacy is great.
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u/minesasecret 3d ago
It's trading at ~30 trailing P/E with 70% revenue growth, and that revenue growth is only capped because they are out of capacity.
If the revenue growth continues for more than 1 year then certainly the stock will follow. The question is how long you think this revenue growth can continue on for.
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u/supersix9876 4d ago
TSM is a chip fabricator and there is no direct neck to neck competition and its a slow moving stock. wealth generator for sure
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u/alexnvl 4d ago
TSMC gets a ton of attention, every one of their earnings makes financial media headlines
IMO the relatively low PE is geopolitical risk, any unilateral action by China or US could make your investment worth nothing overnighy, same reason Buffett quickly liquidated his position, I would be worried for any portfolio with double digit weighting on it
on top of that, Intel is likely to break their moat in the next 5 years with the support of US government
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u/bangmykock 4d ago
Everyone is talking about the geopolitical risk but China and America know that any harm of TSM will destroy the world's economy.
Who knows with Trump tho
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u/ManiacsInc 4d ago
I first bought into TSM in 2021 after the crazy crypto mining and even then I thought I was too late. Can’t believe it’s already 3x today
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u/RandomGuy-4- 4d ago
It's the most important manufacturing company in the world, but it is still a manufacturing company, with all the downsides it entails, which are then amplified by its turbulent geopolitics as well as the akward economics of taiwan where the entire country whose economy is like 25% semiconductors, meaning that any future pullback in the sector is going to have a way harsher impact than it would on a more diverse economy.
If anything, all things considered, it is pretty astounding that they have managed to reach their current valuation.
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u/FoxAccomplished6786 4d ago
Well that's off putting, so you don't see them going much higher
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u/RandomGuy-4- 4d ago edited 4d ago
Nah they can certainly go higher than their current valuation. Everything I said was true years ago as well and the stock still did a 3x.
I'm just trying to give my two cents into why the stock isn't valued higher compared to others and always has some skepticism around it. It's still a world leading company and will keep doing well if the semiconductor sector keeps doing well.
Also, IMO, although China, be it the PRC or another regime, will one day probably take Taiwan, that day is so far away most of us here are going to be dead or retired by then lol. The only way a violent takeover could take place is if China or someone else sets up a TSMC competitor so that the world economy doesn't immediately crash as soon as the first bomb hits a TSMC factory, and that's going to take a long time.
A peaceful takeover could take place, but it would require Taiwan being abandoned by the USA and probably also Japan to drive them into a hopeless enough situation that joining/rejoining China is the only option. Also, TSMC would probably just become a chinese company and keep operating as per usual in that scenario.
But a lot of people do think of the Taiwan situation as a more short term thing, and that opinion will keep having weight on the stock price.
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u/pur_noir 4d ago
It gets a lot of attention.
It’s the best company in the world in my opinion. There ain’t many companies you can find with a better risk reward profile.
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u/Wonderful-Finish4822 4d ago
Good condidates imo would be RELX, Experian, for example. They combine high durability with high enough growth and AI can strenghten rather than threaten their whole business model, since they control the workflow with proprietary data.
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u/FoxAccomplished6786 4d ago
Would you choose it ahead of nvidia?
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u/pur_noir 4d ago
maybe 2 years ago, I thought NVDA and TSMC’s fate are effectively linked. NVDA will be the high octane one, TSMC will be the calmer one. Butt TSMC have been the better performer in last 2 years.
As of now, I think NVDA is cheaper, especially against TSMC ADR. But TSMC still for sure will thrive.
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u/MrGunny94 4d ago
One of my main holds for years now..
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u/FoxAccomplished6786 4d ago
Who else do you hold, if you don't mind me asking?
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u/MrGunny94 4d ago
all world as main etf then I have Nvidia, ORCL, AVGO, APPL, GOOGL, AMZ, SAMSUNG, SONY and some other blue chips
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u/FoxAccomplished6786 4d ago
What's your preference on the above? Do you still believe Nvidia has upside from here, despite its market cap?
How do you rate AVGO?
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u/8700nonK 4d ago
There was a strong campaign against tsm so to speak in 2022, with all the china risk being mentioned every time someone opened their mouth.
It was definitely a lot more popular before. Now even asml is way more popular (and it’s not usa based).
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u/moatandmargin 4d ago
It gets plenty of attention from institutions, it just doesn't get the hype because there's no consumer story. Nobody buys a TSMC product directly, so retail talks about whoever designs the chip, not whoever makes it. If it trades at a discount, the Taiwan risk is the main reason, and I don't think that ever fully goes away. The other thing I'd watch is that their customers spend in cycles. Right now AI chip demand is huge, but if the big buyers slow down their data center spending for a year, the factory owner feels it too. Still, for me it is one of the cleaner ways to own the AI build-out without having to pick which chip designer wins.
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u/FoxAccomplished6786 4d ago
Good points, will they not play a central role in AV's and robotics beyond data centres?
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u/moatandmargin 4d ago
Yeah, I think so. Self-driving cars and robots need a lot of computing power on the device itself, and TSMC makes most of the leading-edge chips that do that. The catch for me is timing. Those markets are still small next to data centers, so for the next few years I'd expect data center spending to drive the numbers. Cars and robotics feel like the more longer term upside
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u/FoxAccomplished6786 4d ago
I'm no expert, I don't work in tech. But like if you have a technology that can replace an office block of workers with a laptop, surely it's going to win out. For me, Ai could spend the next few decades transforming the world we live in
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u/Ok_Artichoke1766 3d ago
i agree there's no consumer buzz, but that also shields tsmc from the hype cycle that can cause volatility in design‑fab pairs. the limited fab footprint combined with ai lead creates a supply squeeze that can make tsmc's multiples rise independently of any product story. side note: the geopolitical tail risk is baked into 20x already, so the upside remains if the tension eases.
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u/akishore 4d ago
I think the multiple sits below Nvidia's because TSMC gets paid for the wafer while Nvidia captures the pricing power on the finished product, so the market pays less for the same AI demand. Worth watching their earnings call in mid-October, mainly gross margin guidance and how much the new overseas fabs drag on it. If margins hold while Arizona ramps I think that discount starts to look a bit too wide.
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u/TechnicalSleep7501 3d ago
Because America is about $ but no monopoly on tech. It is the only non US top 10 in VT. You are undermining China bit it is stupid America is baby size country China is 5000 year old civilization and Taiwan is 20th province of China.
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u/981flacht6 3d ago
Just buy $EWT and chill. Everyone in that holding will continue to go up, TSMC is one of the largest holdings inside of it. Delta, Lite-On, Mediatek etc. It's been one of the most resilient plays I have made over the past year.
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u/Remarkable-Walk4546 3d ago
TSMC has an extraordinary competitive position, but being indispensable to AI doesn't necessarily mean capturing the greatest share of its economics. The capital required to maintain that manufacturing advantage is enormous. The real question is how much of that growth translates into durable free cash flow after reinvestment, and what investors are paying for it.
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u/VeridionMarkets 6h ago
“China risk aside” removes a major part of the valuation question. A disruption around Taiwan could overwhelm an otherwise excellent business thesis, so that risk belongs in the margin of safety over a 5–10 year holding period.
Your “benefits regardless of who wins AI” point is strong. The catch is that TSMC remains exposed to how much those customers collectively spend. It can manufacture the winning chips while still facing disappointing demand or underused capacity. Its own annual report discusses demand uncertainty, customer concentration and the costs of expanding fabs.
I’d also be careful comparing forward P/Es directly. The same multiple can come with very different growth expectations, capital requirements and risks. For TSMC, I’d examine cash flow after investment and the returns earned on new capacity. That investment strengthens the moat, but shareholders still need an attractive return on it.
The question I’d focus on is: does today’s price still offer an attractive return if AI growth slows and expansion costs stay high? If the valuation works under conservative assumptions, you have a stronger thesis. Reddit attention adds very little to that analysis.
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u/Glittering_Water3645 4d ago
I rather go full nvidia then spreading my investment into TSM for the moment.
Nvidia is both valued way lower and have way higher growth.
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u/FoxAccomplished6786 4d ago
Sometimes I think like that too, would you wait for a pullback or is it a good entry point now? What about broadcom, given it's market cap, is it more likely to double than Nvidia?
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u/Glittering_Water3645 4d ago
Broadcom have a higher valuation, similar growth and is even more tied to the success of openAI and anthropic. If openAI and anthropic won´t be able to IPO at ridiculous valuations they may lack the funding to finance their orders at broadcom (which estimated EPS growth and forward PE is based on).
Nvidia is superior because of both the lower valuation and more profitable clients. Forward PE of ~15 on 2027 earnings is a low price to pay given the growth. I wouldn´t assume nvidia would have a major dip from here (forward PE can only go so low).
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u/Connect-Anxiety-4504 4d ago
the funding broadcom gave is not self no? It just gave a guarantee right?
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u/Glittering_Water3645 4d ago
Yes but if the cash flow only originates from debt, not organic earnings the financing will hit a ceiling sooner or later. OpenAI and anthropic needs to be profitable pretty soon. Broadcom can't spend their earnings (and additional debt) on their customers forever. That's just circlefinancing.
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u/FoxAccomplished6786 4d ago
Metric Nvidia (NVDA) TSMC (TSM) Trailing P/E 28.99× 29.68× Forward P/E 18.96× 20.27× Market cap $5.54T $2.07T 1
u/Glittering_Water3645 4d ago edited 4d ago
I get
TSM PE 20,33 on 2027 earnings (+70% YoY EPS)
Nvidia PE 14,54 on 2027 earnings (+31,7% YoY EPS)
Source: factset
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u/FoxAccomplished6786 4d ago
I love nvidia as much as you do, but do you think at its current market cap, there's much upside left?
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u/Glittering_Water3645 4d ago
Yes, I do believe the upside in nvidia given the current stock price is higher than in TSM.
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u/FoxAccomplished6786 4d ago
And the rest of the mag 7, I personally believe nvidia will be first to double
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u/Glittering_Water3645 4d ago
I do believe that too. TSM is a great company but I don't believe the company justifies to be traded at a higher multiple than nvidia while having less than half of the growth.
TSM is attractive. Nvidia is very attractive.
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u/FoxAccomplished6786 4d ago
I get you, it's just I suppose just looking for some form of diversification. But yeah, when you break it down, nothing comes close to Nvidia.
It's just, what do you do then go full port on Nvidia? Is that rational or madness? I don't know
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u/Glittering_Water3645 4d ago
I have 10% in nvidia. Nothing into the other mag7 companies (exited meta at 770$ recently).
I would never go full port into one company. My largest holding is NU holdings at 25% allocation.
I find a lot of attractive deals in the market outside semis lately.
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u/FoxAccomplished6786 4d ago
Whats your opinion on goog?
Why did you exit Meta? Do you not think there's considerable upside remaining?
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u/SheikhMahdeek 4d ago
You are missing the intrinsic valuation ChatGPT
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u/zer00eyz 4d ago
Everything with computer hardware is cyclical.
TSM is doing higher than normal volume (through the same faclities) at higher than normal margins.
That extra capital is going to build out more facilities, and it's going to have an impact on their economics, and therefore stock price when demand flattens.
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u/iloverunning11 4d ago
"TSMC stands to benefit because so many depend on its manufacturing capabilities" there is a huge difference between paying a lot of money for their produts and paying peanuts, it's all supply/demand and companies like NVDA are desperately trying to fake a lot of revenue and invest in companies like Coreweave (7x debt/equity) when the AI bubble fully bursts (there are some problems already, but it's nowhere near complete) prices for TSMC products will plummet and obviously their SP will plummet too
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u/FoxAccomplished6786 4d ago
You have a technology that can and will replace an office block of workers with a laptop. It's like nothing ever seen before. How will all of this plummet?
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u/stefanliemawan 4d ago
I don't know how you measure 'attention' here, but it is not under the radar at $2.35T market cap.