Why You May Be a Taiwan Semiconductor Stock Investor Without Even Knowing It

Core Viewpoint - The geopolitical ties between TSMC and its clients create significant risks for semiconductor investors, necessitating a strategy to mitigate these risks while acknowledging the importance of TSMC in the industry [1][2][3]. Group 1: TSMC's Industry Role - TSMC is the leading manufacturer of advanced chips, producing for major companies like Apple, Nvidia, AMD, Qualcomm, and Intel, which rely on TSMC despite their own foundry capabilities [2]. - The geopolitical situation in Taiwan directly impacts the supply chain for these companies, as most advanced chips are manufactured in Taiwan, limiting alternatives in case of a crisis [3]. Group 2: Financial Performance - TSMC reported a revenue of $40 billion in the first half of the year, marking a 28$17 billion, up 35% from the previous year [4]. - Despite its strong financials, TSMC's price-to-earnings (P/E) ratio is currently at 30, above its five-year average of 24, indicating a potential valuation risk [5]. Group 3: Investment Considerations - Investors should recognize the dissonance between TSMC's risks and those of its customers, as the premium valuations of chip design stocks may not accurately reflect the underlying risks associated with TSMC [6]. - A strategy that involves waiting for discounted valuations in TSMC and its customers may be more prudent than solely investing in TSMC or exiting chip stocks altogether [7].