1. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Forward P/E as of March 3: ~19.4x
Number of Hedge Fund Holders: 186
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is engaged in manufacturing, packaging, testing, and selling integrated circuits and other semiconductor devices. The company announced its intention to expand its investment in advanced semiconductor manufacturing in the US by an additional $100 billion. Building on Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s ongoing $65 billion investment in its advanced semiconductor manufacturing operations in Phoenix, Arizona, the company’s total investment in the U.S. is projected to reach US$165 billion. The expansion consists of plans for 3 new fabrication plants, 2 advanced packaging facilities, and a major R&D team center, strengthening the project as the largest single foreign direct investment in US history.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s business in Q4 2024 was aided by robust demand for its industry-leading 3nm and 5nm technologies. Moving into Q1 2025, the company’s business might be impacted by smartphone seasonality, which is expected to be partially offset by continued growth in AI-related demand. For Q1 2025, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) expects revenue in the range of US$25.0 billion – US$25.8 billion. Overall, the company’s continued leadership in advanced manufacturing processes places it well for healthy future growth.
Wedgewood Partners, an investment management company, published its Q4 2024 investor letter. Here is what the fund said:
“Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was another top contributor to performance during the quarter and for the year. The Company’s earnings growth dramatically accelerated compared to last year as the Company’s wafer fabrication and packaging volumes soared in 2024. In addition, the Company customer prices rebounded in the face of more normalized capital expenditures. The Company maintains a near-monopoly in the fabrication of nearly every new AI accelerator brought to market over the past two years. They continue investing tens of billions to build and 7ill future capacity with orders for what seems to be insatiable hyperscale demand for accelerated computing. The stock ended the year trading at a consensus forward earnings multiple that is several points lower than large cap growth benchmarks, despite the Company’s dominant position in the most important industry that is driving one of the largest technological shifts in a generation.”
While we acknowledge the potential of TSM as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than TSM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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