Taiwan Semiconductor Earnings: Negative News and Upbeat Guidance Create Entry Opportunity

Key Morningstar Metrics for Taiwan Semiconductor Manufacturing

• Fair Value Estimate: $213.00
• Morningstar Rating: 4 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of Taiwan Semiconductor Manufacturing’s Earnings

We are maintaining our fair value estimate for Taiwan Semiconductor Manufacturing TSM after the company reported second-quarter results and third-quarter guidance that was on track with our full-year estimates and more bullish than the PitchBook consensus.

Negative news, like US presidential candidate Donald Trump’s remarks on Taiwan and a Bloomberg article on possible new export restrictions, should have limited direct impact on the firm’s operations. Most of the chipmaker’s direct customers are from the United States or Taiwan. We see this week’s pullback as an entry point for investors seeking an inexpensive way to gain exposure to artificial intelligence and overall semiconductor growth.

We retain our capital expenditure forecast, as our $30 billion estimate for 2024 is in line with the latest guidance of $30 billion-$32 billion, compared with $28 billion-$32 billion before. We are also confident that 2025 capex growth will be 20%, as back-end packaging remains the focus. Management said the shortage of advanced packaging capacity for AI chips should persist through 2025. We believe the risk of oversupply is still modest, as non-AI-related expansion plans are largely unchanged.