Is There a Better Mega-Cap Stock to Buy Now?

Taiwan Semiconductor Manufacturing Company (NYSE:TSM), or TSMC, is one of the best-rated mega-cap stocks by analysts on TipRanks. It’s rated a Strong Buy, with 10 Buy ratings and no Sell or Hold ratings. However, the stock has surged since I last covered it on April 29, and despite several positive catalysts, I’m only somewhat bullish on TSM, with the valuation becoming increasingly stretched. Therefore, it may not be the best opportunity out there despite the Strong Buy consensus rating.

TSMC Surges

Since I last covered TSMC stock, it has surged 38%. That’s just in eight weeks. The stock has been pushed higher by investors’ insatiable demand for companies involved in the development of artificial intelligence (AI) as well as several bullish analyst updates.

This built on stronger delivery figures in the spring, with a 60% surge in April sales to $7.3 billion. That’s a huge increase in anyone’s books. TSMC had already registered a 34.3% increase in revenue growth in March. Unsurprisingly, this was fueled by the relentless demand for AI semiconductors.

The Taiwanese company’s share price has also benefited from its strategic partnerships in recent months, including with Nvidia (NASDAQ:NVDA). TSMC is the exclusive producer of Nvidia’s most advanced training chips, which are continuing to generate exceedingly robust demand, according to Wall Street analysts.

Moreover, recent data put to bed concerns that hyperscale demand would dip during the transition between Nvidia’s current Hopper series products and its upcoming Blackwell series products. The graphics processing units used in the Blackwell architecture are manufactured using a custom-built 4nm TSMC processor.

Geopolitics and Geography Remain Issues

TSMC, the world’s largest contract chipmaker, faces significant geographic concentration risk, and this has long been a concern for investors. Taiwan’s susceptibility to natural disasters, particularly earthquakes, poses a threat to TSMC’s operations, as was demonstrated earlier in 2024. Additionally, escalating tensions with China, which asserts…


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