Along with Nvidia (NASDAQ:NVDA) the hardware company that has benefited most from the artificial intelligence trend is arguably Taiwan Semiconductor (NYSE:TSM). If you feel that you’ve missed out on the rally in Taiwan Semiconductor stock, think again as there’s no limit to how high this stock can go.
Even after an impressive share-price rally, Taiwan Semiconductor still isn’t too richly valued. In fact, Taiwan Semiconductor’s GAAP trailing 12-month price-to-earnings ratio is 28.51x.
The sector median P/E ratio is 30.43x, so don’t assume that Taiwan Semiconductor stock is due for a pullback. It’s a winner that will keep on winning, and if you sit on the sidelines then you’ll only regret it.
Taiwan Semiconductor: Big News in Europe and Taiwan
Sure, Nvidia is the darling of the market in the AI-chip space. However, Taiwan Semiconductor is making strides as the company relentlessly grows and evolves.
Two news items support this point. First, a Taiwan Semiconductor subsidiary, European Semiconductor Manufacturing Co., expects to hire around 2,000 workers from Germany and other European nations.
It’s interesting that Taiwan Semiconductor isn’t top-of-mind in America, but the company has a vast global presence. Clearly, Taiwan Semiconductor’s hiring plans in Europe indicate that the company is in rapid expansion mode.
At the same time, Taiwan Semiconductor is growing within its home country. Reportedly, Taiwan’s Kaohsiung city government gave Taiwan Semiconductor the green light to build the company’s third 2-nanometer chip fabrication factory there.
It will be a massive, 17.22-hectare facility located in the Nanzih District industrial park.
Taiwan Semiconductor Is a ‘Key Beneficiary’ of AI
Experts on Wall Street are virtually unanimously bullish on Taiwan Semiconductor stock. Can you really blame them for being optimistic about the company?
As long as AI technology demand remains robust, Taiwan Semiconductor should continue to provide supreme value for the company’s shareholders.
It’s not difficult to find bullish commentary about Taiwan Semiconductor. For example, analysts with the Baron Emerging Markets Fund expect Taiwan Semiconductor to “sustain strong double-digit earnings growth over the next several years.”
If that happens, it’s easy to envision a rapid expansion of Taiwan Semiconductor’s market capitalization.
In a similar vein, analysts with JPMorgan Chase believe that Taiwan Semiconductor may “lift its 2024 revenue guidance and potentially move up its capex to the higher end of the guidance range.”
Meanwhile, Goldman Sachs analyst Bruce Lu sees “even more attractive risk-reward for [Taiwan Semiconductor] amid the growing, positive sentiment around AI.”
The comment that really resonates with me, though, is Lu’s remark that “With the ongoing proliferation of AI, we see [Taiwan Semiconductor] among the key beneficiaries.”
I agree 100%, and along with Nvidia, Taiwan Semiconductor looks like the biggest winner in the era of AI.
TSM Stock: It’s a Sin to Sit This One Out
Some investors will take advantage of the opportunity with Taiwan Semiconductor; others will “sit this one out” and wait for a share-price pullback. They’ll probably end up waiting for a very long time.
Analysts like Taiwan Semiconductor’s growth prospects, and the company is making significant strides in multiple countries.
So, don’t draw the wrong conclusion that Taiwan Semiconductor stock is overvalued. Instead, get in the winner’s circle and grab some Taiwan Semiconductor shares for a buy-and-hold position.
— David Moadel
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Source: Investor Place