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Buy this Great Stock (TSMC) Down 10% for AI and Tech Upside

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Artificial intelligence standout and chip-making titan Taiwan Semiconductor Manufacturing Co. (TSM - Free Report)  stock has surged 100% in the last year to more than triple the tech sector.

Taiwan Semi has dropped 10% from its early January highs heading into its Q4 2024 earnings release on Thursday, January 16.

TSMC’s pullback provides investors the chance to buy one of the most surefire long-term tech and AI stocks at a discount. Any possible post-earnings selling represents an opportunity to buy Taiwan Semi at an even cheaper price.

Taiwan Semi is a Must-Buy Tech Stock in 2025

The AI boom would not be possible without Taiwan Semi. TSMC physically builds many of the most cutting-edge chips that are powering AI and other technological innovations. Nvidia (NVDA - Free Report) , Apple, AMD, and tons of other tech giants rely on Taiwan Semi to manufacture their most cutting-edge chips.

Taiwan Semi reportedly holds a roughly 60% share of the entire semiconductor foundry market and 90% of advanced chip manufacturing. The costs and institutional knowledge required to build advanced semiconductors create an almost impenetrable moat around Taiwan Semi.

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Image Source: Zacks Investment Research

TSMC stock has tripled the Zacks Tech sector over the last 12 months and the past 20 years (up 2,400% vs. 780%). TSMC is addressing its geopolitical fears by expanding its manufacturing footprint outside Taiwan into Japan and the U.S. Taiwan Semi also pays a dividend and its balance sheet is solid. This backdrop is why investors should make Taiwan Semi a part of their long-term portfolios.

Taiwan Semi is boosting its industry-leading 3-nanometer production as its clients such as Nvidia ramp up shipments to drive the AI arms race. TSMC’s “advanced technologies” accounted for 69% of its Q3 wafer revenue, with 3-nanometer pulling in 20%.

“Strong smartphone and AI-related demand” drove Taiwan Semi’s Q3 sales expansion. TSMC on January 10 announced that its December sales soared 58% YoY. TSMC is projected to grow its revenue by 29% in FY24 and 25% in FY25 to surge from $69 billion in 2023 to $111 billion this year.

Zacks Investment Research

Image Source: Zacks Investment Research

Taiwan Semi is projected to grow its adjusted earnings by 34% in FY24 and 27% in 2025. TSMC’s earnings outlook remains above where it was before its Q3 release, but it has dipped slightly heading into its Q4 release. That said, TSMC has topped our bottom-line estimate for nearly five years running.

Why Long-Term Investors and Traders Should Buy TSMC Stock

Taiwan Semi shares have tripled the Zacks Tech sector over the past 20 years, including a 130% run over the past two years. The chip stock has popped 8% in the past six months to outpace Nvidia’s 3%.

TSMC stock has dropped roughly 10% from its all-time highs ($222 a share) on January 6 to hover at around $200 per share.

Zacks Investment Research
Image Source: Zacks Investment Research

TSMC’s recent slide, coupled with its impressive earnings outlook, has it trading at a 30% discount to its highs at 23.5X forward 12-month earnings. TSMC trades at an 11% discount to Tech and 33% below Nvidia.

Traders might look for a slide to its 21-week moving average ($190 right now) or 200-day ($174). But there is no telling if TSMC will fall after earnings or jump.

Zacks Investment Research
Image Source: Zacks Investment Research

Taiwan Semi’s pullback has it trading right near its 50-day and at neutral RSI levels. Long-term investors might want to buy TSMC right now since timing stocks is difficult. 


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