TSMC: Hot AI Demand Meets Capacity Crunch And Margin Erosion - Time To Take Profits? (Archive)

This 5-Minute Pitch was originally published on Seeking Alpha before the launch of the Hunting Alphas website. It is shared here to showcase my previous work and track record. New 5-Minute Pitches published on this site will not be disseminated anywhere else.

Elevator Pitch

• My high-conviction bullish view on Taiwan Semiconductor Manufacturing Company Limited aka TSMC has reaped great rewards. But after Q2 FY25 results, I am not as enthusiastic now.
• TSMC is seeing red-hot demand driven by high-performance computing needs, but due to capacity constraints, we can't expect commensurate growth.
• Usually, high demand and limited capacity leads to margin improvements via higher pricing. But not in this case as overseas fabs and a strong FX headwind may offset pricing gains.
• TSM stock appears slightly overvalued versus peers, trading at a lower-than-usual discount, which tempers its relative attractiveness.
• TSM stock vs. the S&P500 is at a key resistance level and seeing slowing buyer momentum. I think it is prudent to take some profits off the table here.

Read the full article here.