Billionaire Stanley Druckenmiller Just Bought Taiwan Semiconductor Stock. Is the Foundry Giant Still a Screaming Buy?

Checking in to see what billionaire investors are doing is a great way to source ideas for your own portfolio. One whom I follow is Stanley Druckenmiller, a former hedge fund manager who now runs the Duquesne Family Office. No later than 45 days after the end of each quarter, organizations that have more than $100 million under management are required to file a Form 13F with the SEC, which discloses their holdings at the end of that quarter. By comparing these forms with the prior ones, we can get some insights into what moves they made during the period.

Druckenmiller made some major purchases in Q2, including boosting its stake in Taiwan Semiconductor (NYSE: TSM) by nearly 20%. The chip foundry giant is now the Duquesne Family Office's second-largest holding. However, those purchases all happened by June 30. So the question is: Is Taiwan Semiconductor stock still a buy now?

Image source: The Motley Fool.

About Taiwan Semiconductor

Because 13F forms only describe a fund's end-of-quarter holdings, Druckenmiller could have bought these new TSMC shares any time between April 1 and June 30. Right now, the stock is down by more than 10% from the high it established at the end of June, but it's up over 20% from April 1. So, depending on when Druckenmiller bought shares, today's price may or may not be cheaper than when he got in.

But that doesn't matter. What really matters is where Taiwan Semiconductor is heading, and I think the future looks bright for it.

Taiwan Semiconductor is the world's largest logic chip manufacturer, and it works with nearly every leading tech firm to fabricate the chips they design. While there is some geopolitical risk to its operations due to Taiwan's complicated relationship with nearby China, the company has invested over $200 billion in a manufacturing complex in Arizona, bringing more chip production to the U.S. This doesn't eliminate the risk, but it does reduce it.

In the meantime, Taiwan Semiconductor is bullish on the AI chip trend, and its CEO expects elevated chip demand to last through at least 2029 or 2030. There could be continual high demand beyond that due to the creation of the AI industry, but nobody knows what long-term conditions in that space will look like. However, the bullish outlook for chip sales makes Taiwan Semiconductor an intriguing stock to buy, especially at its current valuation.

TSM PE Ratio (Forward) data by YCharts.

TSMC is trading within its normal valuation range for this time of year and at less than 20 times next year's expected earnings. If it can continue its current growth rate over the next few years, 20% to 30% gains per year could be expected from the stock, easily outpacing the broader market. That makes Taiwan Semiconductor an excellent stock to buy now and hold on to, as the AI arms race is far from over.

Keithen Drury has positions in Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.