[View in browser]( [The Spill Logo] Proprietary Data Insights Financial Pros’ Top Semiconductor Stock Searches in the Last Month Rank Ticker Name Searches
#1 [NVDA]( Nvidia 357
#2 [AMD]( Adv Micro Devices 241
#3 [INTC]( Intel 119
#4 [TSM]( Taiwan Semiconductor 59
#5 [MU]( Micron 53
#ad [Simplifying the World of Investing for You]( Brought to you by [The Alt]( [All eyes are on Real Estate & Private Equity as investors hedge against inflation]( [The Alt - All eyes are on Real Estate & Private Equity as investors hedge against inflation]( Know the market's next move with the latest Alternative Investment news and trends when you sign up for The Alt newsletter for FREE! [Subscribe now](. How Big Can Taiwan Semiconductor Get? Taiwan Semiconductor (TSM) sales are roughly equivalent to the GDP of Panama. Yeah…it’s massive. The company owns over half of the global foundry market, with Samsung coming in a distant second at 18%. By market cap, it’s the second largest semiconductor company behind Nvidia (NVDA). By manufacturing capacity, it's second only to Samsung. Despite its size, Taiwan Semiconductor reported blowout earnings last week, sending the stock up almost 10%. Yet, financial pro search volume continued to focus on Nvidia. We will cover them once they report earnings. But for today’s issue, we wanted to take a look at Taiwan Semiconductor and see how much further this stock could run. Taiwan Semiconductor’s Business To set the stage, let’s discuss how the semiconductor industry works. First you have the design, which is a focus of Advanced Micro Devices (AMD) and Nvidia. Those designs get sent to a foundry for manufacturing, which is where Taiwan Semiconductor plays. Intel (INTC) does design and manufacturing. Taiwan Semiconductor does just manufacturing, taking orders from companies like AMD and turning them into a reality. Many companies shy away from the manufacturing end because it requires heavy capital investment and can fluctuate between boom and bust cycles. Yet, Taiwan Semiconductor continues to do extremely well as demand for AI chips continues to soar along with the smartphone industry. In fact, these two industries account for 86% of the company’s 4th quarter revenues: [Revenue] [Source: TSM 2023 Q4 Investor Presentation]( After a boom in sales post-COVID, 2023 brought quarterly revenue declines as the business normalized. However, management expects growth to return as AI demand heats up in 2024. Financials [Financials] Source: Stock Analysis Taiwan Semiconductor has seen sales jump yearly for the past decade… until this year. Nonetheless, margins are at their highest levels across the board, with free cash flow being the only exception. Capex exploded to $30-$35 billion starting in 2021, double what it was in 2020 and 350% higher than in 2018. Management invested heavily in the 3-nanometer chips demanded by Apple and other smartphone providers as well as the AI industry. That spend should have peaked in 2023 and begin to decline gradually as production ramps, further improving the company’s performance. While $8.8 billion in dividends exceeded the $2.7 billion in free cash flow, that should turn around in 2024 to results similar to 2022 when free cash flow exceeded $9.2 billion. Valuation [Valuation] Source: Seeking Alpha Despite the surge in the company’s stock price, valuations are still quite reasonable. Taiwan Semiconductor trades at just 17.8x forward earnings compared to Nvidia at 51.1x. And Taiwan Semiconductor’s price-to-cash flow of 11.7x is cheaper than perpetual loser Intel (INTC). Growth [Growth] Source: Seeking Alpha 2023 was a rough sales comp year for all processor companies…except Nvidia. While Taiwan Semiconductor won’t hit the same growth figures as Nvidia, its 10% forecast is respectable, coupled with an average sales growth of +15% over the past 3-5 years, something only AMD has matched. Profitability [Profit] Source: Seeking Alpha We were surprised to see Taiwan Semiconductor’s gross margins exceed AMD’s, given AMD is a design-only company. Then again, Taiwan Semiconductor is the best at what they do, with a net income margin of 41.4%, just behind Nvidia. Our Opinion 10/10 While Intel is gunning for Taiwan Semiconductor’s foundry business, they’ve shown no signs of being able to execute. Yes, there’s always the geopolitical risk from China. But we see that is minimal. Taiwan Semiconductor delivers consistent results despite its size. While it’s up a decent amount, we believe it can double from here over the next 3-5 years. [-facebook-share]( [-twitter-share]( [-linkedin-share]( [-email-share](mailto:?body= %3Cbr+%2F%3E%0A%3Cb%3ENotice%3C%2Fb%3E%3A++Undefined+property%3A+stdClass%3A%3A%24previewText+in+%3Cb%3E%2Fvar%2Fwww%2Fhtml%2Fnl_forms%2Fsrc%2FICTheSpill%2Fautomate-ic-article.php%3C%2Fb%3E+on+line+%3Cb%3E102%3C%2Fb%3E%3Cbr+%2F%3E%0Ahttps%3A%2F%2Finvestingchannel.com%2F%3Fp%3D603408?utm_medium=ic-nl&utm_source=115457 ) News & Insights Just Spilled - [Which Leveraged Equity ETF Did Fin Pros Pick This Month?](
- [Financial Pros Like UnitedHealth…Kinda](
- [Why Delta’s Earnings Left Financial Pros in a Pickle](
- [The $100 Billion Question: Can Citigroup Get Its Mojo Back?]( [News & Insights-facebook-share]( [News & Insights-twitter-share]( [News & Insights-linkedin-share]( [News & Insights-email-share](mailto:?body= %3Cbr+%2F%3E%0A%3Cb%3ENotice%3C%2Fb%3E%3A++Undefined+property%3A+stdClass%3A%3A%24previewText+in+%3Cb%3E%2Fvar%2Fwww%2Fhtml%2Fnl_forms%2Fsrc%2FICTheSpill%2Fautomate-ic-article.php%3C%2Fb%3E+on+line+%3Cb%3E102%3C%2Fb%3E%3Cbr+%2F%3E%0Ahttps%3A%2F%2Finvestingchannel.com%2F%3Fp%3D603408?utm_medium=ic-nl&utm_source=115457 ) [We want to hear from you. Let us know your thoughts by clicking here]( [Ads] [InvestingChannel Logo](#) Follow us on: [Facebook Logo]( [LinkedIn Logo]( [Twitter Logo]( [Instagram Logo]( To ensure delivery of all emails, [allow us on your list](.
Manage your subscriptions with our [preference center](.
[Unsubscribe here.](
View our privacy policy [here](. Copyright ©2024 InvestingChannel. All rights reserved.
1325 Avenue of the Americas, Floor 27 & 28 New York, New York 10019 Disclaimer: This is not investment advice. This InvestingChannel, Inc., newsletter is for information purposes only and is based on opinion. Futures, forex, stock, and options trading are not appropriate for all investors. There is a substantial risk of loss associated with trading these markets. Losses can and will occur. No system or methodology has ever been developed that can ensure returns or eliminate losses. InvestingChannel, Inc., makes no representation or implication that using any of the methodologies or systems in this newsletter will generate returns or insure against losses. Investors should be cautious about any and all investments and are advised to conduct their own due diligence prior to making any investment decisions. [Link](