TSM: best A.I. investment you can make
$Taiwan Semiconductor Manufacturing(TSM)$
Taiwan Semiconductor TSM is the largest chip manufacturer in the world. It has a WIDE moat & is the leader in a capital intensive industry set to BOOM. I also believe it's the best A.I. investment you can make & here's why.
1. Market Leader TSMC is the world's largest contracted chip manufacturer. This gives them a lead in securing contracts. This also gives them IMMENSE pricing power in the space with some clients being Nvida $NVIDIA Corp(NVDA)$ & Apple $Apple(AAPL)$ .
2. Growing Demand The demand for these chips is set to just keep rising overtime and TSMC also already has a HUGE backlog. It will keep rising due to continuous advancements in technology like AI, 5G, 6G, and IoT.
3. Barriers To Entry The chip manufacturing space has some of the HIGHEST barriers to entry around. With making a single factory costing atleast $12 billion, only few are able to even make the factories required to manufacture these chips. Their newest factory in Arizona is costing $40 billion.
4. Wide Moat TSMC has a WIDE moat because of the advanced technogical & research capabilities. Since they are able to focus ALL of their resources on manufacturing chips while some others design & manufacture they are miles ahead of the competition.
5. Edge In R&D Spend TSMC has an edge in research & development spend. It has announced that they'll be able to produce 1.6nm chips by 2026. The most advanced chips now are 3nm which TSMC provides. Currently, they are the ONLY company on track to make 1nm chips by 2030.
6. Pricing Power TSMC has the most pricing power out of ANY chip manufacturer & are set to use this again very soon. Gross margin & operating margin trend higher for TSMC overtime and since they are the most advanced chip manufacturer by a wide margin... They can increase prices by up to 20% because Apple, Nvidia, etc have no other choice.
7. Fortress Balance Sheet TSMC has always had more cash than debt & continues to have loads more cash than debt. The company has twice as much cash than they do debt currently!
8. AI Chip Market Set To EXPLODE The AI chip market, despite what most believe, is really just getting started and TSMC stands to benefit immensely. Who do you think will manufacture most of these chips??
9. Strong Revenue Growth TSMC has displayed strong revenue growth and has reported increases in orders & backlog. This revenue growth will only continue & accelerate with the volume/price increases.
10. Price Is Attractive Many will say they have missed the boat with the large run-up as of recently but the truth is you haven't! At a 27 forward p/e it's fairly valued and I'd say even a little undervalued for the longer-term.
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