Taiwan Semiconductor Stock Investors Need to Know These Latest Details

Añadido: 2026-04-29

[00:00:00]Taiwan Semiconductor stock is up over 34% in 2026. Of course, I'm happy about that because I've had the stock where I upgraded the stock to a buy when it dipped below $325 per share.

[00:00:14]Of course, Taiwan Semiconductor reported quarterly financial results last week and there's a lot for investors to digest. I'm going to go over those highlights. I read the entire conference call transcript that all of the financial statements and I highlighted the most important things that investors interested or owning Taiwan Semiconductor stock need to know about and I'm going to discuss those details here. I want to thank The Motley Fool for sponsoring this video. Visit fool.com/parkev for the 10 best stocks to buy now. So, Taiwan Semiconductor has been experiencing a significant increase in their revenue.

[00:00:53]Remember, Taiwan Semiconductor is the manufacturing partner for companies like Nvidia, AMD, Apple, Tesla, even Intel uses Taiwan Semiconductor manufacturing for some of its manufacturing needs. The boom in artificial intelligence has created a surge in demand for TSMC services and the company reported revenue increased by 6.4% from the previous quarter up to $36 billion ahead of their guidance for the quarter.

[00:01:26]So, it was better than what the management team was expecting and they were already expecting a big increase from the same quarter last year. One thing that's been surprising to me is the company's sustainability in their gross profit margins. The management team has been warning investors for several quarters now that their gross profit margin is likely going to decline. But quarter after quarter, they keep reporting margins that keep increasing and this quarter was the same.

[00:01:54]Gross margin increased by 3.9 percentage points sequentially to 66%. It's due to cost improvements, a higher capacity utilization rate, and more favorable foreign exchange rate. And the most important out of those, I think, is the higher capacity utilization rate. What this means is the company has a certain amount of manufacturing capacity available. Let's say it can produce 1,000 units. That's a hypothetical number. And it's producing close to the 1,000 units. It's maxing out, basically.

[00:02:28]It's very difficult for any manufacturing facility to produce to the level of the maximum capacity. It's rare that the maximum capacity is the actual effective capacity for any manufacturing facility. Very difficult to achieve. I don't think it's ever achieved 100% utilization.

[00:02:48]But it's getting up to its maximum based on what overall effective capacity that company has available and that allows the cost of those manufacturing facilities to be spread out across a greater number of units and therefore it decreases the cost per unit of production and that allows a higher profit margin of gross profit margin for the company overall. And that's been what TSMC's been experiencing.

[00:03:15]It keeps adding new supply and its customers keep buying up its manufacturing capacity availability and that's resulting in favorable capacity utilization rates.

[00:03:27]>> [snorts] >> Additionally, its operating profit margins improved by 4.1 percentage points to 58.1%.

[00:03:35]This is among the best of any company I'm following. Nvidia is a little bit higher than this. Visa might be a little bit higher than this. Uh other companies are approaching these levels now due to the boom in artificial intelligence, but this is up there among the best of the best, right? The best of the best is around 65%, 67% was the highest, I believe, Visa has achieved over the previous decade. And so, a margin at 58% is the envy of almost every business in the world to be able to generate this level of profitability. And what makes it even more impressive is this is a manufacturing company. To be able to generate this kind of profitability as a manufacturing business with all of the physical investment, all of the physical assets, it's unheard of. I can't think of any other manufacturing company that even approaches these levels of margins.

[00:04:32]That's why when I covered Taiwan Semiconductor, I often say it's the best manufacturing company in the world regardless of what you're manufacturing, whether it be consumer packaged goods, consumer packaged food, beverages, whatever, electronic devices. There isn't a company that I know of that approaches these levels of profitability. And the driving force behind the success is artificial intelligence or what TSMC calls HPC, high performance computing, which increased another 20% quarter over quarter and it now accounts for 61% of their revenue. This is unheard of, right? In just a few years, this segment has grown to become the largest contributor to the company's revenue while smartphone continues to decrease.

[00:05:24]This used to be this biggest segment for TSMC and it's now just 26% of its overall revenue. So, following this excellent quarter, I've revised my discounted cash flow valuation. I updated the figures and I now expect roughly $5 million more in free cash flow from TSMC starting this year and moving on to the very long term. The that's about 10% or 15% more than what I was expecting from TSMC this year. So, the intrinsic value per share increased to $578.

[00:06:01]Current market price is 402. I still think this is an excellent buying opportunity for long-term investors.