What's Going On With Taiwan Semiconductor Stock On Wednesday?
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Oct 30 2024
0mins
Should l Buy TSM?
Source: Benzinga
TSMC Halts Shipments: Taiwan Semiconductor Manufacturing Company has stopped chip shipments to two developers due to concerns over potential links to Huawei, amid suspicions of U.S. export sanction violations by Bitmain, a major bitcoin mining hardware manufacturer.
Geopolitical Tensions Impacting TSMC: Increasing geopolitical tensions and criticism from Republican presidential candidate Donald Trump regarding Taiwan's role in the U.S. chip industry have negatively affected TSMC's stock performance, despite its significant revenue from the Chinese market.
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Analyst Views on TSM
Wall Street analysts forecast TSM stock price to fall
8 Analyst Rating
7 Buy
1 Hold
0 Sell
Strong Buy
Current: 419.500
Low
63.24
Averages
313.46
High
390.00
Current: 419.500
Low
63.24
Averages
313.46
High
390.00
About TSM
Taiwan Semiconductor Manufacturing Co Ltd is a Taiwan-based integrated circuit foundry service provider. The Company is primarily engaged in integrated circuit manufacturing services. It offers advanced process technologies, specialised process solutions, advanced photomask and silicon stacking, and packaging-related technologies, while supporting a comprehensive design ecosystem. The Company's products serve diverse electronic sectors including artificial intelligence, high-performance computing, wired and wireless communications, automotive and industrial equipment, personal computing, information applications, consumer electronics, smart internet of things, and wearable devices.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
TSMC Faces Impact from Middle East War
- Fuel Price Surge: Since the onset of the Iran war on February 28, fuel prices have surged, directly impacting household budgets and placing financial strain on energy-intensive companies like TSMC.
- Supply Chain Disruption: TSMC's semiconductor manufacturing relies heavily on electricity and special gases (such as helium and hydrogen), and the war has disrupted the supply chains for these critical materials, leading to increased costs.
- Profitability Risks: TSMC's CFO noted during the latest earnings call that while it is too early to estimate the exact impact, rising raw material costs could affect the company's profitability moving forward.
- Short-term Material Security: Although TSMC sources materials from multiple suppliers to ensure near-term operations, it may need to replenish its inventory in the future while prices remain elevated, necessitating close monitoring of market conditions.
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- Market Share Surge: TSMC's high-performance computing (HPC) segment now accounts for 61% of its revenue, highlighting its dominant position in advanced AI chip manufacturing and further solidifying its monopoly in the global semiconductor market.
- Significant Revenue Growth: Over the past three years, TSMC's revenue has surged by 129%, with its operating margin rising from 48.5% to 58.1%, indicating the company's ability to leverage pricing power amid skyrocketing AI demand for enhanced profitability.
- Capital Expenditure Boom: The combined capital expenditure plans of the four major AI players are projected to reach between $680 billion and $710 billion, and while not all will flow to TSMC, the company is expected to benefit significantly, with annual revenue projected to hit $200 billion in the future.
- Robust Demand Continuation: As the usage of AI evolves, TSMC is experiencing sustained strong demand for its advanced AI chips, prompting an increase in capital expenditure to between $52 billion and $56 billion to meet the growing need for computing power.
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- Semiconductor Concentration: Taiwan Semiconductor Manufacturing Company (TSM) and Credo Technology Group (CRDO) follow closely with ratings of 4.97, highlighting their competitive edge and profitability in the semiconductor sector.
- Global Market Presence: European chipmakers Infineon Technologies (IFNNY) and STMicroelectronics (STM) also show strong ratings of 4.82 and 4.76 respectively, underscoring their significant roles in the global semiconductor market.
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- Strong Market Demand: Haas emphasized that the demand for CPUs is robust, particularly with the rise of Agentic AI, which increases the CPU's role in task management, laying a solid foundation for Arm's future growth.
- Production Challenges: Although TSMC is ramping up capacity, Arm faces supply chain bottlenecks due to the complexity of design and production, especially in competing for sufficient production capacity against major clients like Nvidia and AMD.
- Business Model Transformation: Arm is transitioning from its traditional licensing model to producing the AGI CPU, a strategic shift that not only enhances the company's market competitiveness but also provides new momentum for future revenue growth.
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- Occidental Petroleum Downgrade: Louis Gerard downgraded Occidental Petroleum (OXY) from Buy to Hold, believing the stock has reached fair value after a 24.67% total return, with easing Middle Eastern tensions limiting further upside catalysts.
- Taiwan Semiconductor Downgrade Risks: Hunting Alphas downgraded Taiwan Semiconductor Manufacturing Company (TSM) from Buy to Hold, warning of competitive threats from Intel and Samsung that could pressure market share, despite ongoing benefits from AI-driven demand.
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Vanguard Total International Stock ETF Investment Advantages
- Portfolio Diversification: The Vanguard Total International Stock ETF (VXUS) offers investors a low-cost way to diversify their portfolios by investing in nearly 8,800 international stocks, effectively mitigating risks associated with U.S. economic fluctuations.
- Significant Cost Efficiency: With an expense ratio of just 0.05%, this ETF means that for every $10,000 invested, the annual cost is only $5, making it an attractive option for long-term investors looking to enhance their net returns through low fees.
- Attractive Valuation: The average price-to-earnings ratio for international stocks is around 17 times, compared to over 25 times for U.S. stocks, indicating a significant discount that encourages investors to reassess their portfolios in the current market environment.
- Strong Capital Inflows: Currently, nearly $600 billion is allocated to the Vanguard Total International Stock ETF, reflecting investor confidence and its importance in the global market, further solidifying its position as a preferred investment choice.
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TSMC Faces Impact from Middle East War
- Fuel Price Surge: Since the onset of the Iran war on February 28, fuel prices have surged, directly impacting household budgets and placing financial strain on energy-intensive companies like TSMC.
- Supply Chain Disruption: TSMC's semiconductor manufacturing relies heavily on electricity and special gases (such as helium and hydrogen), and the war has disrupted the supply chains for these critical materials, leading to increased costs.
- Profitability Risks: TSMC's CFO noted during the latest earnings call that while it is too early to estimate the exact impact, rising raw material costs could affect the company's profitability moving forward.
- Short-term Material Security: Although TSMC sources materials from multiple suppliers to ensure near-term operations, it may need to replenish its inventory in the future while prices remain elevated, necessitating close monitoring of market conditions.
See More
TSMC's Rise Amid the AI Boom
- Market Share Surge: TSMC's high-performance computing (HPC) segment now accounts for 61% of its revenue, highlighting its dominant position in advanced AI chip manufacturing and further solidifying its monopoly in the global semiconductor market.
- Significant Revenue Growth: Over the past three years, TSMC's revenue has surged by 129%, with its operating margin rising from 48.5% to 58.1%, indicating the company's ability to leverage pricing power amid skyrocketing AI demand for enhanced profitability.
- Capital Expenditure Boom: The combined capital expenditure plans of the four major AI players are projected to reach between $680 billion and $710 billion, and while not all will flow to TSMC, the company is expected to benefit significantly, with annual revenue projected to hit $200 billion in the future.
- Robust Demand Continuation: As the usage of AI evolves, TSMC is experiencing sustained strong demand for its advanced AI chips, prompting an increase in capital expenditure to between $52 billion and $56 billion to meet the growing need for computing power.
See More
Foreign IT Stocks Generate Strong Quant Signals
- Top Quant Ratings: Silicon Motion Technology Corporation (SIMO) leads with a near-perfect Quant Rating of 4.98, indicating strong market performance and investor confidence in its growth prospects.
- Semiconductor Concentration: Taiwan Semiconductor Manufacturing Company (TSM) and Credo Technology Group (CRDO) follow closely with ratings of 4.97, highlighting their competitive edge and profitability in the semiconductor sector.
- Global Market Presence: European chipmakers Infineon Technologies (IFNNY) and STMicroelectronics (STM) also show strong ratings of 4.82 and 4.76 respectively, underscoring their significant roles in the global semiconductor market.
- Quant Rating System: Seeking Alpha's Quant system evaluates stocks based on critical metrics like valuation, growth, stock momentum, and profitability, with ratings above 3.5 indicating bullish sentiment, reflecting positive market expectations for these companies.
See More
Arm CEO Addresses AI Chip Supply Concerns
- Supply Confidence: Arm CEO Rene Haas expressed confidence in meeting the $2 billion customer demand for fiscal years 2027 and 2028, despite CFO's mention of maintaining a $1 billion revenue outlook, indicating concerns about supply chain capacity.
- Strong Market Demand: Haas emphasized that the demand for CPUs is robust, particularly with the rise of Agentic AI, which increases the CPU's role in task management, laying a solid foundation for Arm's future growth.
- Production Challenges: Although TSMC is ramping up capacity, Arm faces supply chain bottlenecks due to the complexity of design and production, especially in competing for sufficient production capacity against major clients like Nvidia and AMD.
- Business Model Transformation: Arm is transitioning from its traditional licensing model to producing the AGI CPU, a strategic shift that not only enhances the company's market competitiveness but also provides new momentum for future revenue growth.
See More
Analysts Upgrade Harley-Davidson and Valero Energy Amid Market Shifts
- Harley-Davidson Upgrade: Analyst Oliver Rodzianko upgraded Harley-Davidson (HOG) to Buy, citing a cultural resurgence and operational turnaround, with a projected two-year annualized CAGR of 35%, though a potential 30% downside risk looms in the short term.
- Valero Energy Benefits: Ronald Ferrie upgraded Valero Energy (VLO) to Buy, highlighting its strategic positioning amid global supply disruptions and industry-leading cost structure, enabling superior margin expansion during the current refining bull cycle.
- Occidental Petroleum Downgrade: Louis Gerard downgraded Occidental Petroleum (OXY) from Buy to Hold, believing the stock has reached fair value after a 24.67% total return, with easing Middle Eastern tensions limiting further upside catalysts.
- Taiwan Semiconductor Downgrade Risks: Hunting Alphas downgraded Taiwan Semiconductor Manufacturing Company (TSM) from Buy to Hold, warning of competitive threats from Intel and Samsung that could pressure market share, despite ongoing benefits from AI-driven demand.
See More
Vanguard Total International Stock ETF Investment Advantages
- Portfolio Diversification: The Vanguard Total International Stock ETF (VXUS) offers investors a low-cost way to diversify their portfolios by investing in nearly 8,800 international stocks, effectively mitigating risks associated with U.S. economic fluctuations.
- Significant Cost Efficiency: With an expense ratio of just 0.05%, this ETF means that for every $10,000 invested, the annual cost is only $5, making it an attractive option for long-term investors looking to enhance their net returns through low fees.
- Attractive Valuation: The average price-to-earnings ratio for international stocks is around 17 times, compared to over 25 times for U.S. stocks, indicating a significant discount that encourages investors to reassess their portfolios in the current market environment.
- Strong Capital Inflows: Currently, nearly $600 billion is allocated to the Vanguard Total International Stock ETF, reflecting investor confidence and its importance in the global market, further solidifying its position as a preferred investment choice.
See More
