Stunning Prediction Makes This Chip Company's Stock an Irresistible Buying Opportunity
While blindly accepting management's words as investment truth can lead to errors, verifying their historical predictions against actual results is a starting point for building trust. Management teams like Taiwan Semiconductor Manufacturing Company (TSMC) that have been in the game for a while and have a solid track record, like CEO C.C. Wei, are easier to trust. Wei recently made a bold prediction about TSMC's trajectory, and investors should take notice.
TSMC: The King of Contract Chip Manufacturing
TSMC, the top contract chip manufacturer, has an excellent reputation for innovation. Companies like Nvidia, AMD, and Apple turn to TSMC to design their chips and outsource production. This setup allows investors to invest in technology without having to pick a winner in a specific competition.
Being a major player in the industry, TSMC has a keen sense of future chip orders. This insight provided the basis for Wei's projection of massive growth for the company over the next five years.
Wei's Game-Changing Project
Due to the strength of the chip market, fueled by AI, smartphones, the Internet of Things, and the automotive sector, Wei predicts that TSMC's revenue will approach a 20% compound annual growth rate (CAGR) over the next five years. Nevertheless, some important details should be noted about this projection.
First, the 20% CAGR does not imply an annual revenue growth rate of 20%. Instead, it refers to the final revenue value compared to the initial value. This way, even if there are negative growth years, the overall 20% CAGR projection can still be met.
Second, not all sectors will contribute equally to the growth. For instance, AI-related revenue is expected to have a staggering 45% CAGR during the same period. This will offset slower-growing sectors and increase AI's importance in TSMC's business portfolio. Currently, AI-related revenue makes up a mid-teens share of TSMC's total revenue, but this portion is expected to grow significantly over the next five years.
Lastly, the 20% CAGR projection incorporates technological advancements. TSMC has plans to introduce a 2nm chip in late 2025 and a 1.6nm chip in late 2026. Any issues with these chips could affect the projected growth, but TSMC's consistent launch timeline inspires confidence.
Is TSMC Stock a Buy?
TSMC has numerous growth catalysts, and the stock price is currently relatively affordable at 21 times forward earnings. Although the projections do not necessarily mean instant returns, a 20% CAGR could be achieved if the outlook matches the predictions.
TL;DR
TSMC, the top contract chip manufacturer, has a strong trajectory, fueled by AI, smartphones, the Internet of Things, and the automotive sector. CEO C.C. Wei projects a 20% compound annual growth rate (CAGR) for the company's revenue over the next five years, with AI-related revenue contributing significantly to that growth. TSMC stock remains fairly valued, offering a potential 20% CAGR for investors, providing it's not already priced in.
In light of Wei's projection, it might be prudent for investors to consider investing in TSMC's stocks, as the company's potential 20% compound annual growth rate could yield substantial returns. Carefully analyzing the financial aspect, investing in companies with a solid track record like TSMC can be a strategic move in the realm of finance.
