We would take any further rallies to sell into the strength as fundamental headwinds are unlikely to make TSM a strong risk-adjusted stock at today's levels, in comparison with other opportunities
Taiwan Semiconductor Manufacturing $Taiwan Semiconductor(TSM.US$, the world's largest contract chipmaker, predicted a 16% drop in sales next quarter due to higher inventory levels and a weakening global economy affecting demand. Despite the challenges, TSMC is investing in long-term demand, with expectations of hitting a business bottom in Q2 and subsequent recovery. For 2023, TSMC predicts the global semiconductor market to decline by a mid-single digit percentage, while the foundry market business is expected to decline in the high-single digit percentage range.
In Q1, TSMC posted a 2% increase in net profit from a year earlier, marking the smallest quarterly growth since mid-2019. Revenue fell 4.8%, in line with the company's forecast. TSMC's dominance in advanced chips for high-end customers like Apple has provided some protection from the broader industry downturn. The company is also in the process of applying for subsidies under the U.S. Chips Act, aimed at boosting domestic chip manufacturing.
Given Warren Buffets sale of TSM, we would stay on the sidelines on this name unless there is at least a 20% correction from here in the stock back to the mid 70s region.
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bananarama : bs