Nvidia’s success is closely tied to Taiwan Semiconductor (TSMC), a key player in the semiconductor manufacturing industry. TSMC’s innovative foundry model, focusing on manufacturing expertise rather than direct chip sales, has led to significant growth and profitability. With clients like Apple, Alphabet, Amazon, and Nvidia, TSMC is at the forefront of the AI revolution and has seen substantial revenue growth in recent years.
Investors are bullish on TSMC’s future, betting on the continued growth of the AI market. However, there are concerns about a potential bubble in AI stocks and geopolitical risks, particularly with Chinese aggression. To mitigate these risks, TSMC is expanding its manufacturing operations outside of Taiwan, with support from countries like the United States.
Despite its strong performance, TSMC’s stock may be overvalued, with a price-to-earnings ratio above 35, well above the S&P 500 average. While the company continues to benefit from AI spending, the high valuation and potential risks suggest that now may not be the best time to buy TSMC stock.
Overall, TSMC’s role in driving the AI revolution is undeniable, but investors should carefully consider the current market conditions and risks before investing in the company.
Article Source
https://www.fool.com/investing/2024/06/21/1-unstoppable-stock-powering-nvidia-and-the-ai-rev/
