The best tech stocks to buy in September

Taiwan Semiconductor (NASDAQ:TSM) remains among the top stocks that many long-term investors continue to focus on. There’s good reason for that, given the company’s 62% market share in the foundry business. The most essential supplier to key chip manufacturers such as Nvidia (NASDAQ:NVDA), Taiwan Semi is a company that has continued to benefit from strong demand for AI chips. And while TSM’s stock hasn’t appreciated to the same extent as Nvidia’s, it’s a company seen by many as a more stable way to play this long-term uptrend, especially as Taiwan Semi diversifies its manufacturing capacity all around the world.

For those who believe in the long-term bullish trajectory of the AI ​​trend and see Taiwan Semi as a clear winner in this space, here are some reasons why TSM stock could be among the best options to buy in September.

Key points about this article:

• Taiwan Semiconductor remains among the first investors in chip stocks to consider exposure to AI secular growth tailwinds.
• A top smelter supplier, Taiwan Semi’s bid for greater geographic diversification could bode well for investors looking at the stock now.
• If you are looking for action with huge potential, be sure to grab a free copy of ours brand new “Next NVIDIA” report.. It has a software stock where we are sure it has 10x potential.

Strong demand

A small semiconductor chip held by a pair of tweezers

Taiwan Semi is expected to present $30 billion in AI-related capital spending this year as the company seeks to accelerate its leading market share and growth prospects in the AI ​​chip space. In addition to demand for AI, the company sees high-performance computing and demand for 5G chips as key drivers of expected long-term growth. And as a key partner to a number of megacap tech companies seeking chips, the company’s customizable manufacturing processes could gain even greater recognition from analysts and investors as this investment race heats up.

Analysts at JPMorgan certainly believe this is the case, as a firm raised its price target to $1,200 on TSM stockmaintaining an overweight rating. In a note to investors, the company highlighted strong prospects for the company’s margin improvement, driven by continued demand for AI.

It is also important to recognize that Taiwan Semi 3 nm and 5 nm technologies is seeing strong demand, supported by its multi-project wafer service, which lowers mask costs. The company’s growth in 3nm production and 2nm development, along with its performance in 7nm, 16nm and 28nm technologies, supported significant revenue growth. In Q2 2024these technologies contributed significantly to overall growth, with the company’s smaller chips the biggest focus.

Data centers require power-hungry GPUs, with the company’s 2nm chips (due in 2025) holding the potential to help customers reduce power consumption by 25% to 30%. This is the kind of technological progress we will need if AI is as great as everyone says it is.

Robust finances

A couple analyzing their financial situation

Taiwan Semi revenue rose 13% to $18.9 billion in Q1 2024with Q2 revenue growing even faster at 33% to $20.8 billion. For Q3, TSMC projects to bring in $22.8 billion, representing a 34% year-over-year increase. July revenue was up 45% from a year earlier, suggesting even faster growth could be possible. I think the next few quarters should provide some light beats given the level of spending we’re seeing from the top tech companies for Nvidia chips.

This is partly because Nvidia’s H100 AI graphics card uses Taiwan Semi’s 5nm process, and Nvidia has secured enough Taiwan Semi’s 3nm chips for the next few years. Indeed, Nvidia’s strong performance is expected to have a positive impact on TSMC stock, despite the stock’s recent decline due to antitrust probes.

It’s worth pointing out that Taiwan Semi, Nvidia and the overall chip sector could see increased volatility given how high valuations have gotten in this space. But with strong demand delivering income and accelerating earnings growth, I think these multiples are currently justified. And at less than 20 times forward earnings, TSM stock looks anything but overvalued at current levels.

TSM looks like a no brainer buy

A massive lithography machine used to manufacture semiconductor chips

TSM stock looks well-positioned for significant upside, especially if the tailwinds we’ve seen forming in the high-performance computing space continue. Cloud giants, hyperscalers and megacap tech companies are all ramping up their spending on chips in an attempt to gain or maintain market share in an increasingly competitive space. As the world looks for new AI capabilities, the companies that truly provide the backbone of this growth will continue to see strong investor interest.

At a reasonable valuation multiple, Taiwan Semi looks like a screaming buy at current levels. And while there’s certainly some geopolitical risk to this stock, given its manufacturing base in Taiwan (and what’s been going on with Chinese tensions lately), the company’s foray into the US and European markets should boost confidence in the ability of this company to continue to supply. long term growth. The faster they can build these factories, the better.

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