Think It's Too Late to Buy Taiwan Semiconductor Manufacturing Company Stock? Here's the 1 Reason Why There's Still Time.
Key Points
Taiwan Semiconductor Manufacturing Company (TSMC) has outperformed every "Magnificent Seven" stock except Nvidia in the past 12 months.
TSMC's competitive moat is its advanced manufacturing abilities.
Many top tech companies rely on TSMC to bring their respective chips to life.
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Many tech stocks have seen their price increase considerably over the past few years, and Taiwan Semiconductor Manufacturing Company (NYSE: TSM), also known as TSMC, is no exception. Over the past three years (ending March 16), TSMC's stock is up over 93%, outpacing every "Magnificent Seven" stock except Nvidia.
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Despite TSMC's impressive run over the past few years, it's not too late to buy its stock. And the reason comes down to its competitive moat.
Image source: The Motley Fool.
TSMC's competitive moat is its manufacturing capabilities. The goal for semiconductors (chips) used in everyday electronics is to become smaller and more powerful. The more this happens, the better and more efficiently electronics perform. And nobody is better than TSMC at bringing these advanced chips to life.
TSMC is more efficient, has higher yields (percentage of chips that work as intended), and can produce at a larger scale than all its competitors. That's why it's the go-to chip manufacturer for top tech companies like Nvidia, Apple, Amazon, and AMD.
Most companies could rely on a different -- and cheaper -- chip manufacturer than TSMC, but they likely know it would mean sacrificing speed and scale. That's why TSMC can use its pricing power to maintain high margins.
When you have such a dominant position in a vital industry, it almost guarantees sustained success. Good business results don't always correlate to stock price growth, but TSMC is a stock whose long-term trajectory I trust to be up.
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Stefon Walters has positions in Apple and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Apple, Nvidia, and Taiwan Semiconductor Manufacturing and is short shares of Apple. The Motley Fool has a disclosure policy.
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