Is Taiwan Semiconductor Stock a Buy Now?

Core Viewpoint - Taiwan Semiconductor (TSMC) is positioned as a critical player in the global semiconductor industry, particularly in the context of AI technology proliferation, with its stock currently down approximately 10% from all-time highs, presenting a potential buying opportunity [1]. Group 1: Technology Leadership - TSMC is recognized as a leader in chip production, benefiting from its neutral manufacturing position, which allows it to capitalize on the overall advancement in technology [2]. - The company is one of the few capable of producing 3nm chips, which are among the most advanced in the market, allowing for greater transistor density and enhanced performance [2]. Group 2: Future Developments - TSMC is developing its next-generation 2nm chips, expected to enter production in 2025, with pre-production demand already exceeding that of its 3nm and 5nm chips [3]. - The 2nm chips are projected to consume 25% to 30% less power than previous generations when configured for the same processing power, addressing significant cost concerns in AI model training [3]. Group 3: Growth Projections - Management anticipates a revenue growth rate of 15% to 20% CAGR over the next several years, driven largely by the increasing demand for AI computing power, which is expected to grow at a 50% CAGR through 2028 [4]. - By 2028, AI-related revenue is projected to account for over 20% of TSMC's total revenue, indicating substantial growth potential [4]. Group 4: Valuation and Investment Outlook - Using a decade-long average P/E ratio of 20, TSMC's stock could have a 14% upside from current levels, but this is considered less attractive given the time frame to return to previous highs [5]. - If revenue growth is adjusted to 20% and the ending P/E ratio to 24, the potential upside increases to 63%, suggesting a CAGR for the stock price of 13%, which would outperform the market's long-term average [6].