When I wrote about TSMC (TSM) (“Taiwan Semiconductor Manufacturing Company”) after second-quarter earnings, I wrote that while the apparent return potential on offer wasn’t bad for a high-quality tech company, I wanted to wait for a pullback. While 10%-plus pullbacks aren’t so rare in TSMC’s history, that was a vain hope given the hot demand for leading-edge (7nm and 5nm) chips for smartphone and data center applications, and TSMC shares are another 30% higher now.
Expectations remain high, but given virtually no spare capacity, increasing scale benefits at 5nm, and no near-term reason to expect weaker demand from customers like Advanced Micro Devices (AMD), Apple (AAPL), Broadcom (AVGO) at the most advanced nodes, not to mention ongoing issues at Intel (INTC), it’s hard to say that those expectations aren’t attainable. TSMC shares now trade at around a 10% premium to SOX versus a historical small discount (0%-10%), but that premium has been as high as 35% in the past. I’m not calling for a near-term tumble in the shares, but this is now definitely more of a near-term earnings momentum story than a long-term value story.
Follow this link to the full article:
Taiwan Semiconductor Finds A New Gear On Strong Leading-Edge Demand
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