Taiwan Semiconductor Manufacturing (TSM): A Semiconductor Giant in Steve Cohen’s Portfolio, Posing Tremendous Upside Potential

The Role of Taiwan Semiconductor Manufacturing (TSM) in Point72’s Strategic Tech Bet

Billionaire investor Steve Cohen’s Point72 Asset Management has long been a bellwether for institutional tech investments, and its recent stakes in Taiwan Semiconductor Manufacturing (TSM) underscore a bold bet on the semiconductor sector’s future. As of Q4 2024, TSM ranked among Point72’s top five holdings, accounting for 1.1% of its $39.3 billion portfolio. This $493 million allocation—bolstered by a 106% increase in shares held—reflects Cohen’s conviction in TSM’s dominance in advanced chip manufacturing and its role in the AI-driven tech revolution.

Why TSM Deserves Its Spot in Point72’s Portfolio

TSM’s Q1 2025 earnings reveal a company thriving amid macroeconomic headwinds. Despite a 3.4% sequential revenue dip (to $25.5 billion), driven by smartphone seasonality, TSM’s AI-driven segments surged. AI accelerators—such as GPUs and HBM controllers—are projected to double in revenue in 2025, with a five-year compound annual growth rate (CAGR) of mid-40s. This growth is fueled by TSM’s leadership in 3nm/5nm node technology and its expansion of CoWoS (chip-on-wafer-on-substrate) capacity, critical for AI chips.

Strategic Moves and Financial Resilience

TSM’s $100 billion investment in its Arizona facility—a cornerstone of its global manufacturing strategy—highlights its commitment to diversifying supply chains. While this expansion risks 2–4% annual margin dilution through 2030 due to higher costs abroad, TSM’s long-term gross margin target of 53%+ remains achievable through operational efficiencies and scale. The company also weathered the January 2025 Taiwan earthquake, recovering lost output swiftly, showcasing its robust contingency planning.

Cohen’s portfolio allocations align with these strategic bets. Point72’s Q4 2024 holdings prioritized tech giants like Amazon (2.06%), Microsoft (1.6%), and NVIDIA (1.26%), but TSM’s $493 million stake signals a deeper belief in its foundational role in the semiconductor ecosystem.

Upside Drivers: AI, HPC, and Global Demand

The AI boom is the clearest catalyst for TSM’s growth. As high-performance computing (HPC) and AI infrastructure expand, TSM’s advanced nodes (3nm, 5nm) are indispensable. Its CoWoS technology, which integrates chips for AI accelerators, is already in high demand, with clients like NVIDIA relying on it for next-gen GPUs.

TSM’s Q2 2025 revenue guidance of $28.4–29.2 billion—a 13% sequential increase—reinforces this optimism. Management also reiterated a full-year revenue growth target of ~25% in USD terms, driven by AI and HPC adoption.

Risks and Challenges

Despite its strengths, TSM faces headwinds:
1. Margin Pressure: Overseas factories (e.g., Arizona) and earthquake-related costs have already dented gross margins to 58.8% in Q1 2025, down from prior quarters.
2. Geopolitical Uncertainty: U.S.-China trade tensions and tariff policies could disrupt supply chains, though TSM’s dual focus on Taiwan and the U.S. mitigates some risks.
3. Market Cyclicality: Semiconductor demand is tied to broader tech cycles; a slowdown in AI adoption or consumer spending could impact growth.

Conclusion: A Compelling Investment Case

TSM’s position in Point72’s portfolio is no accident. With $493 million allocated and a 106% share increase, Cohen’s firm is betting on TSM’s unmatched technological leadership and its role in the AI revolution. Key data points reinforce this thesis:

• AI Revenue Growth: Expected to double in 2025, with a five-year CAGR of mid-40s.
• Capacity Expansion: $38–42 billion in 2025 CapEx to support advanced node production.
• Margin Resilience: TSM’s 53%+ long-term target, despite short-term dilution, signals confidence in scale advantages.

While risks like margin pressure and geopolitical shifts loom, TSM’s dominance in high-margin advanced nodes and its strategic global footprint position it to outperform peers. For investors, TSM offers a rare blend of stable cash flows and exposure to transformative tech trends, making it a cornerstone of Point72’s—and any long-term investor’s—portfolio.

In Cohen’s words, TSM is not just a holding but a “strategic anchor” for the semiconductor era. With AI’s trajectory still in its infancy, TSM’s upside potential remains vast.