Nvidia’s Huang says buying TSMC’s stock is ‘very smart.’ The pros share their take
Taiwanese chipmaker Taiwan Semiconductor Manufacturing Co made headlines last week following Nvidia CEO Jensen Huang’s remarks that buying its stock would be “very smart. ” “Well, first of all, I think TSMC is one of the greatest companies in the history of humanity, and anybody who wants to buy TSMC stock is a very smart person,” he said on Friday during his Taiwan visit. Shares in TSMC rose on Monday and Tuesday and are up 9.77% since the start of the year. Last month, TSMC’s market capitalization crossed $1 trillion, thanks to a strong sales forecast driven by growing artificial intelligence demand. Its market value now stands at 30.42 trillion New Taiwan dollars, which is just under $1 trillion, according to LSEG data. 2330-TW 1Y mountain TSMC shares TSMC manufactures advanced chips, including for major chip designers such as Nvidia and AMD . The Taiwanese firm has now taped out a new graphics processing unit and silicon photonics processor for Nvidia’s next-generation Rubin-architecture supercomputers, meaning chip design has been finalized and manufacturing can begin. The firm has cut the use of Chinese chipmaking equipment in its most advanced chip plants to avoid potential U.S. curbs that could impede production, Nikkei reported, citing comments from sources familiar with the matter. FactSet data shows that most analysts are bullish on TSMC. Of the 44 analysts covering the stock, 42 give it a buy or overweight rating, while one has a hold and another has a sell rating. Analysts’ average price target is NT$1,354.27, giving it 15.7% potential upside. The spotlight on TSMC has now raised questions about whether those not already invested should buy the stock. A neutral view Tariq Dennison, co-founder and investment advisor at GFM Asset Management, is neutral on TSMC. It’s “notable when an industry leader says something so positive about another company in the same industry,” he told CNBC Pro . However, Dennison said, he tends to “get cautious, or even bearish,” when too many people are bullish on a stock or sector. Dennison attributed Huang’s view to TSMC’s “very clear lead” in the manufacturing of the most advanced semiconductors, including 2 to 3 nanometer technology, and the likelihood that it will “keep that lead for many years to come. He also inferred that Huang expects TSMC to “keep growing and monetizing that lead for many years to come.” That’s a “much more optimistic assumption than I would make,” the wealth manager said. He said he believes TSMC is of high quality and its growth prospects are “well priced in a 23 times forward earnings, versus the 4.25% yield on the 10-year U.S. Treasuries.” However, he cautioned that its valuation underprices the risks of geopolitical uncertainties and unforeseen technological disruptions. The bulls However, Arthur Lai, head of technology research Asia at Macquarie Capital, is bullish on TSMC. Huang’s “comments revalidate our raised CoWoS [chip-on-wafer-on-substrate] forecasts and reinforce that Nvidia’s execution is a multi-year demand driver for AI packaging and interconnects,” he said. CoWoS is an advanced packaging technology developed by TSMC. “We see continued upside for the advanced packaging and networking supply chain,” Lai added in an Aug. 26 note. Lai had raised his target price on the stock by 2% to NT$1,310 following the company’s second-quarter results in July. He simultaneously increased his 2025 and 2026 net profit forecast for TSMC by 11% and 5%, respectively, given better-than-expected AI growth and gross profit margin impact from foreign exchange charges. That was thanks to TSMC’s solid near-term AI demand, even as the company anticipates softness in its revenue in the last quarter of the year in light of “tariff-related uncertainties and a still cautious consumer segment,” Lai wrote in a July note. Phelix Lee, equity analyst at Morningstar, is also bullish on TSMC. He has a five-star rating on TSMC and considers it “attractively valued” given its quasi-monopoly in manufacturing AI and other premium semiconductor chips, he told CNBC Pro. Morningstar gives stocks a rating of between one and five stars, with a top rating indicating that its shares are undervalued. In July, Lee hiked his fair value estimates for TSMC to NT$1,800 from NT$1,700, after the company raised its full-year revenue growth guidance by about 30% in U.S. dollar terms. He also raised his 2025-2029 revenue estimates by 5% and earnings per share estimates by 9% in anticipation of AI’s contributions. “TSMC is undervalued as the market is overestimating tariff effects and underestimating the longevity of AI investments,” he wrote in a July note. — CNBC’s Dylan Butts contributed to this report.
