TSMC Earnings: Raising Valuation by 6% After Upbeat Guidance and Lower 2024 Capital Expenditure

We lifted our fair value estimate for Taiwan Semiconductor Manufacturing to TWD 950 per share (USD 151 per ADR at current exchange rates) after management provided a better full-year 2024 outlook than we foresaw thanks to strong artificial intelligence-related growth and lowered 2024 capital expenditure budget. The release of AI-capable consumer devices strengthens our belief that AI is here to stay, and the high growth phase will not be over soon. TSMC’s disciplined approach to capital spending in 2024 should reassure investors concerned with an underwhelming recovery and potential gluts two to three years ahead. With the stock undervalued to our fair value, we don't think it is too late for investors to jump on the stock.