To The Moon

This is a dead cat bounce, not a sustainable recovery.

Everyone’s getting euphoric about TSMC’s beat, but I think we’re missing the forest for the trees:

The AI chip cycle is maturing faster than expected. Yes, demand is still strong, but we’re already seeing signs that the hyperscalers (Microsoft, Google, Meta) are getting more disciplined about AI capex. The “buy everything GPU-related” phase is ending. TSMC’s advanced node capacity was built for a demand level that may not sustain.

China is the elephant in the room. TSMC’s Taiwan location is becoming a bigger geopolitical liability, not smaller. Any serious escalation in cross-strait tensions sends this stock into freefall. The US is also pushing harder for domestic chip production - every CHIPS Act dollar going to Intel and others is a long-term threat to TSMC’s dominance.

The memory cycle is still broken. While logic chips get the headlines, a huge chunk of semiconductor demand comes from memory, and that market is still oversupplied and structurally challenged. TSMC benefits indirectly from overall chip ecosystem health.

Valuation disconnect. At current levels, TSMC is priced like it’s going to grow at 2021-2022 rates forever. But we’re likely entering a more normal, cyclical environment where chip demand grows with GDP, not 50% annually.

I’d rather buy beaten-down names like Micron or even Intel at these levels than chase TSMC after a 30% run. The easy money in chips was made in 2023.

The sector rotation into chips feels like FOMO, not fundamentals.​​​​​​​​​​​​​​​​