2) Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Average Upside Potential: ~41.2%
Number of Hedge Fund Holders: 186
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) manufactures, packages, tests, and sells integrated circuits and other semiconductor devices. Bank of America Securities analyst Brad Lin reiterated a “Buy” rating on the company’s stock, providing a price target of $250.00. The analyst believes that Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s gross profit margin is expected to see improvement, courtesy of price increases, yield improvements, and a favorable product mix. Its dominant position in the semiconductor industry is mainly aided by its technological leadership. It has remained at the forefront of developing and implementing advanced manufacturing processes, enabling the company to sustain its competitive edge.
The elevated demand for AI-related chips resulted in higher orders for Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s most advanced manufacturing processes. This trend has been fueling innovation in chip design and manufacturing techniques. Moving forward, the company’s continued leadership in advanced manufacturing processes places it well for healthy future growth. As the chip design complexity increases, the number of companies that can manufacture at the advanced nodes decreases. This trend supports Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s strengths, resulting in higher market share and increased profit margins.
Wedgewood Partners, an investment management company, released 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.”
