2 Reasons Taiwan Semiconductor Is a Must-Buy for Long-Term Investors

Core Viewpoint - Taiwan Semiconductor Manufacturing Company (TSMC) is positioned strongly for future growth as the world's largest contract chip manufacturer, making it a critical investment opportunity for investors [1] Investment Thesis - DeepSeek's R1 model, while innovative, does not impact TSMC's long-term investment viability as it focuses on making AI training more efficient, requiring less computing power [2] - The market's assumption that AI spending will decrease due to efficiency is misguided; instead, spending will likely remain steady while models become more efficient, accelerating innovation and returns on AI investments [3] Stock Performance - TSMC's stock has seen a decline of about 10% from its all-time high, presenting a buying opportunity for investors, especially given its valuation at 29 times trailing earnings and 22 times forward earnings [5] - The company is expected to achieve a 20% compound annual growth rate (CAGR) in revenue over the next five years, with AI-related hardware projected to grow at a 45% CAGR during the same period [6] Growth Drivers - Chip orders are typically placed years in advance, indicating that a single breakthrough from a competitor will not significantly alter TSMC's growth trajectory [7] - Upcoming chip technologies, including the 2-nanometer (2nm) chip, will provide significant efficiency gains, offering the same computing power as 3nm chips while consuming 20% to 30% less energy [8] - The A16 chip, set to debut in 2026, is expected to deliver an additional 15% to 20% energy savings compared to the 2nm chip, which is crucial for AI hyperscalers [9] Market Outlook - The chip industry continues to present growth opportunities alongside innovations, and while DeepSeek's efficiency improvements are notable, they are likely to be replicated by other AI platforms, sustaining AI investment momentum [10]