A Most Prudent Investment: Taiwan Semiconductor

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The present exuberance in the market, whilst gratifying to those who participate, does render the discernment of true value a task of no small difficulty. One observes a multitude of companies enjoying a temporary elevation, and is left to ponder which amongst them possess the solid foundations necessary for enduring prosperity. The recent attention lavished upon those engaged in the pursuit of Artificial Intelligence is particularly striking; a feverish enthusiasm prevails, and one cannot help but question whether such heightened expectations are entirely justified.

Yet, amidst this general agitation, one company appears to possess a degree of stability and promise that merits a closer inspection. Taiwan Semiconductor Manufacturing, or TSMC as it is commonly known, is not merely swept along by the prevailing currents, but rather appears to be a source of strength in itself. It is a consideration, therefore, to which a prudent investor might well give heed.

Indeed, were one constrained to select a single holding for the long term, it is to this establishment that my inclinations would decidedly turn.

A Most Satisfactory Account of Growth

TSMC’s recent reports have been, to put it mildly, agreeable. Sales have increased nearly 26% to $33.7 billion, and earnings have followed suit with a rise of 35% to $3.14 per American depositary receipt. Management anticipates further growth in the coming quarter, projecting an increase in sales of approximately 86% – a figure which, whilst perhaps ambitious, is not entirely improbable given the current demand. Furthermore, they foresee revenue increasing by 30% in the year 2026, a prospect which is most encouraging.

Of particular note is the company’s healthy gross margin, exceeding 62%. This allows for a corresponding increase in the bottom line as sales expand, a circumstance which is to be applauded. One observes, with some concern, that certain companies engaged in this same pursuit, whilst enjoying rapid sales growth, have yet to demonstrate a corresponding level of profitability. It is a matter of some importance, therefore, to select a holding that is not merely fashionable, but also demonstrably sound.

The discerning investor seeks not merely a temporary advantage, but a sustained position of strength, and it is in this regard that TSMC truly excels.

An Unassailable Position in a Competitive Landscape

TSMC possesses a distinction that sets it apart from its rivals. Whilst others strive for prominence in the burgeoning field of Artificial Intelligence, TSMC has already established a commanding presence, a veritable moat around its business. It manufactures approximately 70% of the world’s semiconductors, and a remarkable 90% of the most advanced chips. Such a dominance is not easily overcome, and it affords the company a degree of security that is most enviable.

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Only TSMC and Samsung currently manufacture 3nm and 5nm processors at scale, and even Samsung’s efforts have been hampered by challenges in achieving high yields. Consequently, when those large technology companies require advanced AI chips, they are almost certain to turn to TSMC. This is not a matter of mere preference, but of practical necessity.

Morningstar’s research suggests that this advantage could endure for decades, a prospect which is most reassuring to those who seek a long-term investment. It is a position of strength that is not to be underestimated.

A Prudent Course for the Future

For these reasons, I believe that a holding in Taiwan Semiconductor would be a most wise decision. The expenditure on AI data center infrastructure is projected to reach an estimated $3 trillion to $4 trillion over the next five years, providing the company with ample opportunity to benefit from this surge in demand.

However, even beyond this immediate opportunity, the demand for advanced processors is likely to endure for decades to come, driven by emerging technologies such as the Internet of Things and self-driving cars. TSMC, with its clear lead in processor manufacturing, is well-positioned to remain the leading manufacturer for years to come, regardless of what new technological advancements may emerge. It is, in short, a most prudent investment for the discerning investor.

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2026-02-05 14:22