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S&P 500   3,852.36
DOW   32,920.46
QQQ   296.26
Inflation Tips for Startups – Top 11
The Next Big Crisis Is Here (Ad)
Trustees picked by DeSantis may change progressive college
Qatar replaces Russian company in Lebanon gas exploration
The Next Big Crisis Is Here (Ad)
France must raise pension age to 64, prime minister says
Elon Musk's mysterious ways on display in Tesla tweet trial
The Next Big Crisis Is Here (Ad)
Biden, McCarthy to discuss debt limit in talks on Wednesday
Asian shares mixed after last week's gains on Wall Street
S&P 500   3,852.36
DOW   32,920.46
QQQ   296.26
Inflation Tips for Startups – Top 11
The Next Big Crisis Is Here (Ad)
Trustees picked by DeSantis may change progressive college
Qatar replaces Russian company in Lebanon gas exploration
The Next Big Crisis Is Here (Ad)
France must raise pension age to 64, prime minister says
Elon Musk's mysterious ways on display in Tesla tweet trial
The Next Big Crisis Is Here (Ad)
Biden, McCarthy to discuss debt limit in talks on Wednesday
Asian shares mixed after last week's gains on Wall Street
S&P 500   3,852.36
DOW   32,920.46
QQQ   296.26
Inflation Tips for Startups – Top 11
The Next Big Crisis Is Here (Ad)
Trustees picked by DeSantis may change progressive college
Qatar replaces Russian company in Lebanon gas exploration
The Next Big Crisis Is Here (Ad)
France must raise pension age to 64, prime minister says
Elon Musk's mysterious ways on display in Tesla tweet trial
The Next Big Crisis Is Here (Ad)
Biden, McCarthy to discuss debt limit in talks on Wednesday
Asian shares mixed after last week's gains on Wall Street

Warren Buffet Bought Taiwan Semiconductor Stock, Should You?

Key Points

  • Taiwan Semi manufactures 80% of the world’s computer chips including top brands like Apple, Applied Micro Devices, Nvidia
  • Its 5-nanometer wafers are driving gangbuster business and 3-nanometer wafers will be a growth driver in 2023 as the
  • Company raises estimates for Q4 2022.
  • Geopolitical risk centers around China’s claim to the Country.
  • TSM shares are trading at 13.97X forward earnings and pays a 1.69% annual dividend yield.
  • 5 stocks we like better than Taiwan Semiconductor Manufacturing
Warren Buffet Bought Taiwan Semiconductor Stock, Should You? On Nov. 14, 2022, Warren Buffet’s Berkshire Hathaway (NYSE: BRK.A) reported a new investment in its quarterly 13-F filing indicating a 60.1 million share stake in one of the world’s most dominant semiconductor maker Taiwan Semiconductor Manufacturing Company (NYSE: TSM) stock. This sent shares sky rocketing 10% higher. While his $4.1 billion stake only gives a bit over 1% of the outstanding shares, it’s his actions that have spurred a rally in TSM and the semiconductor stocks. His reputation as one of the greatest investors of all-times provides an instant premium to the companies he invests in. Countless fund managers and retail investors follow his every investment move and commonly follow him into positions after they are revealed in SEC filings. TSM shares spiked over 10% on the news. Before chasing the stock, it’s prudent to analyze the underlying Company’s operations. Taiwan Semi has brought capacity back online to improve the global supply chain for semiconductors and is firing on all cylinders.

The World’s Largest Chipmaker   

Taiwan Semiconductor is a contract computer chip maker. It owns fabrication plants (FABs) that manufacture chips to client specifications. Fabs are notoriously expensive and time consuming to build. Intel (NASDAQ: INTC) manufactures its own chips through its own fabs and is planning on bolstering its contract business. Taiwan Semi produces nearly 80% of the world’s semiconductors for some of the most well-recognized brand like Apple (NASDAQ: AAPL) which is its largest customer,  Applied Micro Devices (NYSE: AMD), Broadcom (NASDAQ: AVGO), Marvell Technologies (NASDAQ: MRVL), MediaTek, Qualcomm (NASDAQ: QCOM), and Nvidia (NASDAQ: NVDA). The Company is extremely profitable with 57.3% gross profit margins. The pandemic lockdowns and subsequent reopenings caused chip demand to surge while supply was thin as fabs were taken offline and needed to get back into production. This was the major reason for the supply chain disruption that saw automakers like Ford Motor (NYSE: F) and General Motors (NYSE: GM) to slowdown their new car production due to the shortage of computer chips. The supply chain has been improving as production capacity returns back to normal. The Company plans to build another multi-billion dollar Arizona factory in addition to the $12 billion investment committed two-years ago, according to The Wall Street Journal.


Firing on All Cylinders

On Oct. 13, 2022, Taiwan Semi released its fiscal third-quarter 2022 results for the quarter ending September 2022. The financials were reported in New Taiwan dollars or NT$. The Company reported an earnings-per-share (EPS) profit of NT$10.83 excluding non-recurring items versus consensus analyst estimates for a profit of NT$10.39, a NT$0.44 beat. Revenues grew 47.9% year-over-year (YoY) to NT$613.14 billion beating analyst estimates for NT$607.97 billion. Demand was driven by strong demand in the 5-nanometer (N5) technologies.  

CEO Comments

Taiwan Semi CEO C.C. Wei commented, “Looking ahead to 2023 with the successful ramp up of N5, N4P, N4X and the upcoming ramp of N3, we're continuing to expand our customer product portfolio and increase our addressable market. While the ongoing semiconductor inventory correction will affect the first half 2023 utilization rate, we expect our business to be supported by stronger demand for our differentiated and leading advanced and specialty technologies, and for 2023 to be a growth year for TSMC.” N3 is expected to ramp up volume in 2023 as demand is stronger than its supply. N3 revenues are expected to perform stronger in 2023 than N5 sales in its first year 2020. He added, “Our 3-nanometer technology will be the most advanced semiconductor technology in both PPA and transistor technology when it is introduced. We are confident that N3 family will be another large and long-lasting node for TSMC.” Smartphones and high-performance computing (HPC) are driving the demand.

China Risk

Investors must be aware of the geopolitical tensions happening between China and Taiwan and the U.S. China believes that Taiwan is a province of the People’s Republic of China (PRC), but Taiwan is an independent country as the Republic of China (ROC) ever since 1949. Since Taiwan produces the majority of the computer chips in the world, the U.S. has an interest in the independence of Taiwan as a trading partner under democratic rule. So far, it’s just been a battle of words, but an invasion of Taiwan by China is a possibility that can’t be ruled out. The Biden administration has implemented semiconductor restrictions to China which will impact AMD and NVDA’s artificial intelligence (AI) chip sales in 2023. The administration has signed the $50 billion CHIPS and Science Act in October 2022 to bolster semiconductor production in the U.S. by investing in fabs.

Warren Buffet Bought Taiwan Semiconductor Stock, Should You?

Year-Long Weekly Downtrend Channel Reversal

On the weekly candlestick chart, TSM has been in a weekly downtrend channel since February 2022 and rejecting off the falling weekly 20-period exponential moving average (EMA) twice. The stock put in a weekly swing low and monthly double bottom near the $59.75 level. The weekly stochastic coiled like a spring back up through the 20-band triggering the weekly market structure low (MSL) above $63.43. TSM finally broke through the weekly 20-period EMA resistance at $77.04, but the 50-period MA resistance continues to grind down at $94.34. The volume surged on the 13-F filing squeezing short-sellers as buyers chase shares higher. Pullback support levels to watch sit at $74.92, $67.73, $63.43 weekly MSL trigger, $58.75 monthly double bottom, and $52.53.

Should you invest $1,000 in Taiwan Semiconductor Manufacturing right now?

Before you consider Taiwan Semiconductor Manufacturing, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Taiwan Semiconductor Manufacturing wasn't on the list.

While Taiwan Semiconductor Manufacturing currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Taiwan Semiconductor Manufacturing (TSM)
2.4716 of 5 stars
$93.30-0.2%1.51%14.22Moderate Buy$94.00
Berkshire Hathaway (BRK.A)
0.913 of 5 stars
$470,000.00+0.0%N/A-393.35Buy$495,000.00
Apple (AAPL)
2.9491 of 5 stars
$145.93+1.4%0.63%23.88Moderate Buy$166.16
Advanced Micro Devices (AMD)
2.6857 of 5 stars
$75.40+0.3%N/A45.15Moderate Buy$95.71
Broadcom (AVGO)
3.038 of 5 stars
$590.99-1.3%3.11%22.30Moderate Buy$667.21
QUALCOMM (QCOM)
3.3617 of 5 stars
$133.40-0.4%2.25%11.72Moderate Buy$158.46
Marvell Technology (MRVL)
2.586 of 5 stars
$44.25-0.3%0.54%-276.56Moderate Buy$63.54
NVIDIA (NVDA)
2.7422 of 5 stars
$203.65+2.8%0.08%86.66Moderate Buy$209.23
Compare These Stocks  Add These Stocks to My Watchlist 

Jea Yu

About Jea Yu

Contributing Author: Trading Strategies

With over 20 years of active participation and analysis of the US equities, options and futures markets, Mr. Yu brings fresh insights into the workings of the financial markets. He has published four books by esteemed publishers McGraw-Hill, John Wiley & Sons, Marketplace Books and Bloomberg Press. His brainchild, the Underground Trader, was voted Forbes Best of the Web for four consecutive years under the active trader category. He has been a featured speaker all over the country at various expos and seminars who enjoys a standing-room-only reception in the largest convention halls from New York to Las Vegas. He has been quoted and featured in USA Today, Wall Street Journal, Traders Magazine and the Financial Times and various trade publications like Stocks & Commodities, Active Trader and Online Investor. Mr. Yu has a B.A. in Liberal Arts and minor in Business Administration from the University of Maryland.
Contact Jea Yu via email at JeaYu21@gmail.com.

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