Taiwan Semiconductor Manufacturing (TSM)
Fundición de semiconductores
The only foundry able to manufacture the most advanced nodes in volume: 74% of wafer revenue comes from 7 nanometers or below, return on invested capital is 44% and at $415 the estimated total return over five years is +9% annually, meaning Fairly valued.
- Price
- $415.41
- Intrinsic value (5y, base)
- $617
- Total annual return (5y)
- 9.4%
- Status (nominal)
- Fairly valued
- Margin of safety
- +20%
The essentials
- Dominant foundry at the leading edge: 7 nanometers or below accounted for 74% of wafer revenue in 2025, versus 69% in 2024, with 3 nanometers alone already at 24%.
- Return on invested capital of 44%, well above the 10% bar, with operating margin rising from 45.7% in 2024 to 50.8% in 2025 and 59.3% in the first half of 2026.
- Net cash position of NT$1,735 billion and guided capital investment of $52,000 to $56,000 million for 2026, funded with internal operating cash flow and corporate bond issuance, as in the prior three fiscal years.
- It trades close to intrinsic value, far from the required margin of safety. Estimated total return over five years is +9% annually, with the entry multiple declining from 41× as earnings grow.
- The risk is not competitive but geopolitical: manufacturing concentration in Taiwan, tariffs on advanced chips and export licenses that renew annually.
Intrinsic value — two valuation methods
Total return at 5 years: 132.0%/year = 116.3% appreciation + 15.8% dividend. The target price ($19,653) is ex-dividend; the $940 in dividends collected over 5 years are added separately.
By both methods, the value today (DCF $16,010 · Multiples $16,589) exceeds the market price ($415).
Pillars of the analysis
The verdict — today vs 5 years
Today — with margin of safety: at $415 trades ~97.5% below its value discounted to today (~$16,589) — the wide discount we require (≥38%, equivalent to a ~15% annual return); the risk is covered by the margin, not the rate.
At 5 years — Muy infravalorado: the target price ($19,653) plus dividends yield above the required average return (10%) — the business compounds.
The bridge: the return at 5 years comfortably exceeds the risk-free rate (4.5%) — and the discount reaches the required margin of safety.
Thesis
The business
A foundry with a sustained process lead, operating margin of 50.8% in 2025 and 59.3% in the first half of 2026, and return on invested capital of 43.9% against the 10% bar. High-performance computing demand already accounts for 58% of revenue and is the segment where the customer's technical alternative is weakest.
The valuation
It is valued by multiples on after-tax operating profit in year 5, the correct metric for a capital-intensive business: it charges for the investment instead of giving it away. The path starts at 33% for 2026, with the first half already reported growing 35.6%, and decelerates smoothly down to 10%. The exit multiple is 23 times, within the band for the semiconductor archetype.
The margin of safety
There is a margin of safety: the market's perception is meaningfully worse than reality. At $415 the estimated total return is +132% annually over five years, against a value per depositary receipt of $19,653. The dividend yield contributes 33.7% to that total. The 41× entry multiple is measured against a year-0 that still does not incorporate the margin jump from the first half of 2026.
What to watch
The disconfirming risk is geopolitical and regulatory, not competitive: the annual license under which the Nanjing fab has operated since its authorization expired in December 2025, the 25% tariff on certain advanced computing chips, and any deterioration in the Taiwan Strait. On the business side, what to track is capacity utilization and the margin dilution brought by the new fabs outside Taiwan.
Educational / informational. Does not constitute investment advice.