Opinions
Shane Obata
Taiwan Semiconductor MFG.
TSM-N
PAST TOP PICK
May 29, 2025
Stock price when the opinion was issued
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Undisputed leader in leading-edge foundries, and it's been that way for several years. Has anything changed? Now branching out to the US, which gives geographic diversification. This may be costly, but it has pricing power.
Another reason it's done well is because competitors have done poorly. But INTC is getting its act together, and Samsung will at some point. Down the road (and it may be a long road), there will be some additional competition. But TSM will still be the leader. A staple in most growth portfolios.
His choice in the space. It makes the chips for NVDA and a whole slew of others. It's more diversified. Valuation is cheaper. Much clearer growth path going forward over next few years.
NVDA has fallen, but it's not a cheap stock. Factored into the share price is a huge growth expectation. Just because share price has fallen on a high flyer, that doesn't necessarily make it cheap.
Takes about 10 years to build a foundry, and you need access to water. So there goes Texas, Arizona, etc. In Japan, a foundry was rejected because they didn't want to divert water that's needed to grow food. Overhang of geopolitical risk of China invading Taiwan. Only 10% of foundries are in the US.
Great products. Leader. Alternative in Europe is ASML, which he owns. He wouldn't own both. No problems with TSM, but you have to understand geopolitical and cost risks.
His preference in the space. Leading manufacturer, so over time everything flows through them. Essential company in global economy. Because of the threat of Chinese takeover, will always trade at reasonable valuation. Now ~15x PE. Diversifying manufacturing footprint across mature markets in US and Europe.
Great example of a direct AI beneficiary. World's leading foundry business -- they make all the chips for everyone. Completely dominant via size, scale, and expertise. Though spending billions on building fabs, it extends competitive advantage because no one can compete.
One of the few stocks you can still get at inexpensive valuations, due to Taiwan invasion risk. Concern is not going away, but it's not near term. Smart to offer Trump additional investment, but to be vague on the timeline. Strong demand for US production, but it will come at higher costs of production.