On November 14, 2022, Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A) introduced a brand new funding in its quarterly 13-F submitting, buying 60.1 million shares in one of many world’s dominant semiconductor producers, Taiwan Semiconductor Manufacturing Firm ( NYSE) signifies : TSM) stock. This despatched shares hovering 10%. Whereas his $4.1 billion stake accounts for simply over 1% of excellent shares, it is his actions which have sparked a rally in TSM and semiconductor stocks. His repute as one of many best buyers of all time brings an instantaneous bounty to the businesses he invests in. Numerous fund managers and particular person buyers observe him each step of the best way, and normally observe him in positions after being disclosed in SEC filings. TSM shares surged over 10% on the information. Earlier than chasing the inventory, it’s advisable to research the operations of the underlying firm. Taiwan Semi has introduced capability again on-line to enhance the worldwide semiconductor provide chain and is working on all cylinders.

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The world’s largest chip producer

Taiwan Semiconductor is a contract producer of laptop chips. It owns fabrication vegetation (FABs) that manufacture chips to buyer specs. Fabs are notoriously costly and time consuming to construct. Intel (NASDAQ: INTC) makes its personal chips in its personal factories and plans to strengthen its contract enterprise. Taiwan Semi produces nearly 80% of the world’s semiconductors for a number of the most well-known manufacturers resembling Apple (NASDAQ: AAPL), its largest clients, Utilized Micro Gadgets (NYSE: AMD), Broadcom (NASDAQ: AVGO), Marvell Applied sciences (NASDAQ: MRVL) , MediaTek, Qualcomm (NASDAQ: QCOM) and Nvidia (NASDAQ: NVDA). The corporate is extraordinarily worthwhile with a gross revenue margin of 57.3%. The pandemic lockdowns and subsequent reopenings induced chip demand to surge whereas provide was tight as fabs had been taken offline and compelled again into manufacturing. This was the principle motive for the provision chain disruption that induced automakers like Ford Motor (NYSE:F) and Common Motors (NYSE:GM) to decelerate their new automobile manufacturing because of the lack of laptop chips. The provision chain has improved as manufacturing capability has returned to regular. Based on the Wall Avenue Journal, the corporate plans to construct one other multi-billion dollar manufacturing unit in Arizona along with the $12 billion funding made two years in the past.

Ignition on all cylinders

On October 13, 2022, Taiwan Semi launched its outcomes for the third quarter of 2022 of the fiscal 12 months for the quarter ended September 2022. Monetary knowledge is offered in New Taiwan {Dollars} or NT$. The corporate reported earnings per share (EPS) of NT$10.83 excluding one-time objects in comparison with analyst consensus estimates for earnings of NT$10.39, a success of NT$0.44. Income rose 47.9% year-on-year (YoY) to NT$613.14 billion, beating analyst estimates of NT$607.97 billion. Demand was pushed by robust demand for five nanometer (N5) applied sciences.

CEO Feedback

CC Wei, CEO of Taiwan Semi, commented, “Wanting in the direction of 2023, with the profitable ramp-up of N5, N4P, N4X and the upcoming ramp-up of N3, we are going to additional develop our product portfolio for patrons and develop our addressable market. Whereas the continued semiconductor stock correction will impression the utilization price in H1 2023, we count on our enterprise to be supported by stronger demand for our differentiated and main superior and specialty applied sciences and that 2023 can be a progress 12 months for TSMC.” N3 will enhance quantity in 2023 as demand outstrips provide. N3 gross sales are anticipated to outperform N5 gross sales in 2023 in 2023. He added, “Our 3-nanometer expertise would be the most superior semiconductor expertise in each PPA and transistor applied sciences when it’s launched . We’re assured that the N3 household can be one other massive and sturdy node for TSMC.” Smartphones and high-performance computing (HPC) are driving demand.

China danger

Buyers want to concentrate on geopolitical tensions between China and Taiwan and the US. China believes that Taiwan is a province of the Folks’s Republic of China (PRC), however Taiwan has been an unbiased nation because the Republic of China (ROC) since 1949. As a result of Taiwan produces the vast majority of the world’s laptop chips, the US has an curiosity in Taiwan’s independence as a trading associate beneath democratic rule. Up to now it is solely been a disagreement, however a Chinese language invasion of Taiwan is a chance that can’t be dominated out. The Biden administration has launched semiconductor restrictions for China that can impression AMD and NVDA synthetic intelligence (AI) chip gross sales in 2023. The federal government signed the $50 billion CHIPS and Science Act in October 2022 to spice up US semiconductor manufacturing via funding in factories.

One 12 months weekly downtrend channel reversal

On the weekly candlestick chart, TSM has been in a weekly downtrend channel since February 2022, rejecting the falling 20-period weekly exponential shifting common (EMA) twice. The inventory hit a weekly swing low and a month-to-month double backside close to the $59.75 level. The weekly stochastic snaked up via the 20-band like a feather and triggered the weekly market construction low (MSL) above $63.43. TSM lastly broke the weekly 20-period EMA resistance at $77.04, however the 50-period MA resistance continues to say no to $94.34. Quantity skyrocketed on the 13-F submitting, which pressured quick sellers whereas patrons chased stocks higher. Pullback assist ranges to look at are $74.92, $67.73, $63.43 weekly MSL set off, $58.75 month-to-month double backside and $52.53.