Taiwan Semi's Results Bring Some Relief, With Strong Demand For IoT And HPC

The global COVID-19 outbreak has made uncertainty the word of the moment, and the semiconductor space is no exception. Although data center spending remains strong, investors and analysts have fretted over the potential to hits to semiconductor demand in markets like consumer devices and autos. Based on Taiwan Semiconductor Manufacturing's ("TSMC") (NYSE:TSM) results and guidance, though, it looks like 2020 may yet hold up better than feared.

TSMC's short-term valuation has historically been driven by operating margins, which in turn are significantly influenced by capacity utilization. While today's valuation is not unreasonable relative to expected margins, I think you can argue that the modeling uncertainty calls for at least some margin of safety. I still think TSMC is a high-quality company, but without a wider margin of safety, there are other ideas in the chip space that I prefer today.

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Taiwan Semi's Results Bring Some Relief, With Strong Demand For IoT And HPC