TSMC's Strong Outlook: A Deep Dive into Valuation and Growth

TSMC shares recently closed at $238.72, up 2.6% in the past week, and 18.4% year-to-date. The company's strong growth is driven by global demand for advanced chips and industry partnerships. TSMC is undervalued in four out of six valuation checks, earning a value score of 4. A discounted cash flow analysis suggests the stock is about 5.0% undervalued, with an intrinsic value of $251.39 per share.

Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), the primary manufacturing partner of Nvidia, has reported a robust second-quarter (Q2) performance, driving a significant spike in its stock price and growth metrics. The company's growth score in Benzinga's Edge Stock Rankings surged from 29.96 to 88.33 points, reflecting a monumental increase of 58.37 points [1].

TSMC's Q2 revenue reached $31.7 billion, a 38.6% year-over-year (YoY) increase, surpassing consensus estimates of $30.04 billion. The company also posted profits of $13.03 billion, or $2.47 per share, which exceeded analysts' expectations of $2.37 per share. These impressive figures underscore TSMC's strong market position and growth trajectory [1].

The company's exemption from Trump's 100% tariffs on semiconductors also contributed to the stock's recent surge. Taiwanese officials confirmed that TSMC was excluded from these tariffs, a key catalyst that boosted investor confidence. Furthermore, Nvidia CEO Jensen Huang visited Taiwan last week, emphasizing TSMC's crucial role in the semiconductor industry and finalizing a deal to produce six new products for the company. This strategic partnership between TSMC and Nvidia is expected to further bolster both companies' market positions and drive innovation in the semiconductor sector [1].

Shares of TSMC have been performing favorably, with a 1.12% increase on Monday, trading at $235.59, and another 0.12% gain after hours. The stock scores highly on momentum, growth, and quality metrics, with a favorable price trend across short, medium, and long-term horizons [1].

In addition to these developments, TSMC is also making significant strides in its manufacturing capabilities. The company is phasing out all Chinese technology from its new 2-nanometer (2-nm) production lines to avoid potential US sanctions. This move is tied to the proposed US "Chip EQUIP Act," which aims to maintain an edge over China in the AI race. TSMC is accelerating its US expansion, with up to 30% of its most advanced production, including 2-nm and below, potentially coming from US plants in the future [2].

TSMC's strong growth is driven by global demand for advanced chips and industry partnerships. However, the company is currently undervalued in four out of six valuation checks, earning a value score of 4. A discounted cash flow analysis suggests the stock is about 5.0% undervalued, with an intrinsic value of $251.39 per share [3].

References:
[1] https://www.ainvest.com/news/nvidia-supplier-tsmc-sees-growth-metrics-spike-stock-set-breakout-2508/
[2] https://www.tomshardware.com/tech-industry/semiconductors/white-house-wont-ask-for-ownership-stake-in-tsmc-or-micron-in-exchange-for-chips-act-funds-companies-already-investing-more-in-the-us-expected-to-be-exempt
[3] https://finance.yahoo.com/news/nvidia-supplier-turning-heat-growth-233116171.html