Buy Tsmc Stock

last updated on

Buy Tsmc Stock

Should You Buy Taiwan Semiconductor Stock?

Taiwan Semiconductor Manufacturing (TSM) is a unique company and different from most other AI stocks. In most industries, there are many alternatives if you don't like the current supplier. But when it comes to logic chip manufacturing, the only choice is TSMC.

The 52-week high of TSMC is around $480. The current trading price is still below that yearly high. This clearly suggests that there's a chance for TSMC to go back to that high again.

TSMC Stock Has A High Valuation

But we can't really rely on pricing history here, as TSMC is now near its historic highs. A more practical approach is to look at the valuation history.

In the last 10 years, TSMC was trading at a P/E ratio of 23. Now, it is trading at 31 times its earnings. So, it is clear that TSMC is trading at a high valuation.

Normally, a high valuation is usually a bad thing, and many investors avoid such stocks. But TSMC is different, as it has posted strong growth year after year. Also, periods of high growth are accompanied by periods of high valuation.

According to TSMC's CEO, they expect strong chip demand in 2028, 2029, and 2030. This means TSMC has several years of growth ahead of it. This alone justifies the high price tag of the TSMC stock.

The only risk associated with buying TSMC stock is the cyclical nature of the chip business. For now, we don't know what TSMC's business will look like once the AI boom is over.

Also, the AI industry is now, and everyone is currently spending a lot of money on development. But once the spending comes down to reasonable levels, it will definitely have an impact on TSMC's bottom line.

But for the next 4-5 years, TSMC stock is definitely a buy. It has years of solid growth ahead of it, and there's no real competitor to TSMC.

Trending Stories