Taiwan Semiconductor Trading at Discount: Should You Buy the Stock?

Core Viewpoint - Taiwan Semiconductor Manufacturing Company (TSMC) has demonstrated strong performance with a stock increase of 46.7% over the past year, while still being attractively valued with a forward P/E ratio of 20.22, slightly below the industry average of 20.92 [1][3] Financial Performance - TSMC reported Q4 2024 revenues of $26.88 billion, a 37$504 million [5] - Earnings per share (EPS) for Q4 2024 were $2.24, surpassing expectations by 8 cents [5] - Advanced process technologies (7nm and below) contributed 74$25 billion and $25.8 billion, indicating a 34.7$9.20, reflecting a 30.7% year-over-year increase [9] AI and HPC Demand - The ongoing AI boom positions TSMC as a key player in a multi-year growth cycle, with AI-related revenues tripling in 2024 and expected to double again in 2025 [10][11] - TSMC forecasts a compound annual growth rate (CAGR) of approximately 40% for AI-related revenues over the next five years [12] Capacity Expansion and Global Strategy - TSMC plans to invest between $38 billion and$42 billion in 2025, with 70% allocated to advanced process technologies [13] - The company is expanding globally with high-volume production in Arizona and additional fabs in Japan and Germany, expecting limited impact on gross margins from these investments [14] Investment Recommendation - TSMC's strong market position, leadership in AI and HPC manufacturing, and strategic investments make it a compelling buy at current levels, presenting an attractive entry point for long-term investors [15][16]