Analyst Says ‘No Alternative' for Taiwan Semiconductor Manufacturing (TSM), Calls Valuation ‘Cheap'

Yahoo

27-04-2025

We recently published a list of . In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against other top stocks to watch ahead of May.
Aswath Damodaran from NYU Stern School of Business said in a latest interview with CNBC that while investors are 'celebrating' positive results of a few major tech companies, the problems haunting these firms will take a while to show up in their results. However, Damodaran, also known as 'Dean of Valuation,' said it won't be prudent to 'give up' entirely on Mag. 7 companies.
'They can consolidate their advantage. In a weird way, again, all these troubles might play into the hands of the Mag 7, because the more troubles there are, the more flexibility gets rewarded. And as you pointed out, these companies are incredibly flexible, incredibly adaptable. We saw that with COVID, we saw that in 2022 with inflation, and I'm convinced you're going to see it again. Doesn't mean you load up on the Mag 7, but if you've never owned them, you had a chance to buy into at least one or two of them in the last month. You might have missed that chance, but the chance was there. So I wouldn't give up that easily on the Mag 7.'
Damodaran said investors experienced a lot of 'trauma' in April. He argued against reactionary investing and said that when investors respond to daily events and news cycles, they damage their portfolios.
'Maybe the best thing investors could have done is left at the start of the month, gone somewhere without internet service, and come back at the end of the month. Because everything we do is reactive, and often when you're reacting to day-to-day events, you're going to end up doing more damage to your portfolio than helping.'
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Doug Clinton from Intelligence Alpha said in a recent program on Schwab Network that his AI models 'like' Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) and explained some reasons behind his bullish view on the stock:
'The reason I think that our models like TSM is number one, you think about it from a valuation perspective. The stock has had a tough year so far, as have many chip stocks, and if you look at the forward earnings, we're trading at about 16 times forward PE. That's below the midpoint of the 10-year range for TSM, so valuation-wise, we're in a reasonable place. But number two, structurally, you just think about TSM as a company and AI in general. Any chip builder who is making these leading-edge chips, they have to use TSM. There's really no alternative, and so I think from a monopolistic standpoint, it's a great business trading at a cheap valuation. I think it'll be rocky from here because there'll be more tariff news, but I still think you want to own it over a longer time period.'
Middle Coast Investing stated the following regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q1 2025 investor letter:
'Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the company we own with the most obvious geopolitical risk, and we cut our position in half. I know that if Taiwan-China flares up the damage will extend much wider, but TSM would seem to be the first domino there. And it's not as if Taiwan is having an easy time of it with the current U.S. administration.'
Overall, TSM ranks 2nd on our list of top stocks to watch ahead of May. While we acknowledge the potential of TSM as an investment, our conviction lies in the belief that under-the-radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than TSM but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.