Taiwan Semiconductor Manufacturing Company (
TSM Quick Quote TSM - Free Report) is leading the fourth industrial revolution from behind the scenes. TSMC is the largest semiconductor manufacturer in the world (54% share) with a market positioning that is multiples ahead of its competitors. This stock has consistently driven returns for investors, and I would consider them one of the safest tech growth investments in the industry.
After TSMC blew past its Q2 earnings estimates last week, illustrating 34% revenue growth year-over-year and robust margin expansion, leading to the enterprise's most profitable quarter since its inception. The pandemic appears to have provided innovation-driven TSMC with a strong tailwind that I expect will continue to fill the company's sails for years to come.
The world has seen
5 years of digitalization in 5 months. Cutting-edge chip technology has never been in high demand with the expansion of data centers for advanced cloud-computing and preparation for the 5G revolution.
Analysts continue to push their EPS estimates higher and higher, thrusting TSM into a Zacks Rank #1 (Strong Buy).
Building for The Future
TSMC creates 85% of the world's semiconductor prototypes. Its Open Innovation Platform supports start-ups and enterprises alike by reducing design barriers are improving first-time integrated circuit (I.C.) success.
TSMC has seen more semiconductors than any other company in the world. They are working at the largest scale and with the most state-of-the-art technology to improve a firm's "design time, time-to-volume, time-to-market, and ultimately, time-to-revenue," according to TSMC investor relations site.
The most trusted tech names in the world turn to the most trusted semiconductor foundry on the globe for their manufacturing and innovative needs. TSMC's customers include companies like Intel (
INTC Quick Quote INTC - Free Report) , Nvidia ( NVDA Quick Quote NVDA - Free Report) , Broadcom ( AVGO Quick Quote AVGO - Free Report) , Qualcomm ( QCOM Quick Quote QCOM - Free Report) , and even Apple ( AAPL Quick Quote AAPL - Free Report) .
More and more tech companies are turning to foundries for their I.C. production needs as the technology required to compete becomes impossible to produce in-house. For example, Samsung and TSMC recently teamed up in the development of 5-nanometer transistors, which would give it the ability to put 30 billion transistors onto a chip the size of your fingernail.
This company has an enormous amount of growth ahead of it. Its realized economies of scale have rippled through the company's financials, positioning it to reap the benefits from the next wave of hyperscaling, A.I. development, and the implementation of 5G technology.
Taiwan Semi is Silicon Valley's go-to chip manufacturer. TSMC strategic Arizona plant will manufacture cutting-edge 5-nanometer transistors. The advanced semiconductor plant will cost $12 billion, and its target completion is 2024.
This news followed the Trump Administration voicing its concern about chip-makers reliance on Asia. According to sources familiar with the matter, both the State and Commerce Department are involved with the plans.
Operations on American soil will only deepen Silicon Valley's reliance on this semiconductor manufacturing powerhouse.
Buy The Rally
Innovation-driven chipmakers are forced to use TSMC because no other fabricator can meet their requirements. TSMC has driven over 15% CAGR on its top and bottom lines since it went public in 1994. TSM shares have driven consistent growth for decades and will for decades to come.
This stock offers both capital gain opportunity and a lofty 2% dividend, which provides those apprehensive investors with a guaranteed return that outpaces any "safe" fixed income option.
These shares are trading at 20 times forward earnings, representing a discount to both its sector and the broader market. TSM is currently trading at all-time highs. Still, despite potential short-term volatility, I expect TSM (the largest semiconductor stock by market cap) to be a significant equity market driver through the Roaring 20s. This stock is a robust long-term investment.
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