Is Taiwan Semiconductor Manufacturing Company Limited (TSM) A Good Stock to Buy Right Now?

We recently compiled a list of the 8 Good Stocks To Buy Right Now. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against the other good stocks to buy right now.

On October 14, Tom Lee, Fundstrat Global Advisors managing partner and head of research, appeared in an interview on CNBC to discuss the latest market trends and share his expectations.

In a previous interview, Lee hinted that a period of market volatility is expected, as 2024 heads for a soft landing. However, in this interview, Lee revealed that he had underestimated the market and that it had been extremely resilient and confident, contrary to what he believed earlier. He adds that this indicates the decreasing importance of macroeconomic data to investors.

Lee also adds that for the past two years, investors have been expecting a recession and have held back. Henceforth, with all this cash on the sidelines, investors have been more than willing to invest. October so far has been a great month for the market, despite CPI data being higher than expectations.

Lee emphasizes the need for the Fed to be more supportive as concerns over the job market rise and the upcoming election draws closer. He suggests that despite the election results he expects stocks to perform well in 2025.

The market rose to an all-time intraday earlier today and the Fed governor stressed the need for caution amid decreasing interest rates. On October 15, Warren Pies, from 3Fourteen, appeared in an interview on CNBC to discuss his market thesis for the rest of the year.

Pies suggests that rates are the biggest risk to the market at the moment, especially if drastic measures are introduced. He further adds that if the Fed decides to bring the rate down to 3% immediately, the long-term market outlook could be extremely volatile.

He explained that the concern is more about the rate of change and not the absolute level the Fed is trying to achieve. Pies adds that the market still has a lot of room to run before another drastic cut is implemented. He emphasized that the Fed must operate at a pace the market can digest. He also suggested that the market has started to reaccelerate, hinting that a soft landing is more likely.

Now that we have studied the market outlook up until the end of 2024, let's take a look at some of the good stocks to buy right now.

Our methodology

We used a consensus-based approach and sifted through financial media reports to first compile a list of good stocks to buy right now. We then shortlisted and ranked these stocks by using Insider Monkey's hedge fund data for the second quarter of 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

A close-up of a complex network of integrated circuits used in logic semiconductors.

Number of Hedge Fund Holders: 156

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is a semiconductor company that makes chips for technology giants like NVIDIA and AMD. It ranks third on our list.

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is expanding its presence across the world, especially in Europe. In addition to that, the company has huge bets on artificial intelligence. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) expects revenue from AI chips to increase at a compound annual growth rate (CAGR) of 50% by 2027.

On October 14, Reuters reported that the company is expected to report a 40% increase in revenue in FQ3 2024, due to soaring demand for AI and AI products. Analysts polled by Reuters expect third-quarter revenue to reach $9.27 billion.

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) benefits from its partnerships with Nvidia, AMD, Qualcomm, and Apple. However, this is not the only thing that sets it apart from its competitors. TSMC owns cutting-edge technology to exploit the demand for AI chips. The AI chip market is expected to grow at a compound annual growth rate of 38% through 2032, and TSMC is on track to exploit it.

Diamond Hill Capital stated the following regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q2 2024 investor letter:

"On an individual holdings’ basis, top contributors to return in Q2 included our long positions in Alphabet, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) and Microsoft. Semiconductor manufacturer Taiwan Semiconductor’s (TSMC) fundamentals remain solid as demand for its chips continues growing — particularly as the machine learning and cloud computing trends gain more traction."

Overall TSM ranks 3rd among the 10 good stocks to buy right now. While we acknowledge the potential of TSM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TSM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.