TSMC(TSM) The Motley Fool·2025-02-22 12:03Core Viewpoint - The recent 13F filings reveal that Coatue Management, led by billionaire Philippe Laffont, has significantly increased its investment in Taiwan Semiconductor Manufacturing (TSMC), indicating strong confidence in the company's future growth potential in the AI sector [1][2][10]. Company Overview - Taiwan Semiconductor Manufacturing is the world's largest contract chip manufacturer, producing chips for major tech companies like Nvidia and Apple, allowing these companies to focus on design rather than manufacturing [3]. - TSMC maintains a neutral position in the chip market, manufacturing for competitors such as Nvidia and AMD, which has contributed to its rise as the leading chipmaker [4]. Growth Projections - TSMC's management anticipates a 45% compounded annual growth rate (CAGR) for its AI-related chips over the next five years, reflecting the increasing demand driven by the AI arms race [5]. - Overall, TSMC projects a total revenue CAGR of approximately 20% over the next five years, showcasing robust growth potential for an already large business [6]. Investment Insights - Despite TSMC's strong growth outlook, its stock is currently valued similarly to market-average companies, trading at 22.4 times forward earnings, which is comparable to the S&P 500's valuation of 22.5 times [9]. - The discrepancy between TSMC's growth potential and its current market valuation presents a compelling investment opportunity, as indicated by Coatue Management's recent $120 million investment in TSMC [10].