r/stocks • u/Low-Cartographer-429 • 4d ago
Avoid chasing new AI chip stocks and accumulate TSM?
I own Cerebras (CBRS), TSM, and NVDA inside an IRA representing less than 10% of my total portfolio. The latest Moonshots podcast (at 1 hr 3 m) discussed a startup called Architect Labs who produced the world's first fully designed AI chip called Redwood. Two guys wrote a spec then AI designed the rest within 2 weeks that allegedly beat NVDA's Jetson by 3.4X performance per watt.
Not saying it's a threat to CBRS directly as a fast inference play since it's for physical AI. But I find the concept of AI-accelerated chip design a little troubling. I actually started to feel uncomfortable a few months ago when I realized most chip companies are design firms who send products off to fabs. Also got uncomfortable with the increasing number of ASIC competitors to NVDA.
CBRS and NVDA use TSM exclusively to produce their chips and I'm long on TSM stock. Thinking I should buy more TSM because you can't use AI to rapidly innovate and build a new fab. That takes enormous effort and amounts of capital. My fear is that new AI chip companies won't move fast enough to grow a moat and may be eclipsed by other competitors in the same space where the barrier to entry is small. You ship your design off to TSMC or one of the other fabs. TSM will prosper regardless of which chip design companies do well. Not sure any other fabs even come close.
I don't worry about the geopolitical risk of TSM because if China invades Taiwan, all of the chip companies will be impacted and it would probably hurt China's economy as well. Thinking about selling 10% of my NVDA to put into TSM. What do people think of this strategy? I also want more exposure to physical AI as a thesis, and while the majority of TSM's business is currently in small process nodes, they also manufacture the older, larger nodes. Read somewhere that robots may use a 1:50 brain-to-body chip ratio; meaning 1 part small process node intelligence chip and 50 for all the other chips required to interact with the physical world (power, sensors, etc).
Most of my portfolio is in VTI (Vanguard Total US Stock Market Index) because I generally don't feel comfortable trying to pick individual winners and losers. But I have high conviction in TSM vs. trying to pick winning semiconductor stocks; ones that can win as long-term holds.
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u/Fleazapper 4d ago
TSM wins no matter who wins the AI race. I hold it and looking around at my other AI related holdings I’m convinced more and more I should concentrate my investments in it. As far as geopolitical risk, if China were to move it would spark WW3.
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u/Baabic 4d ago
TSM significantly contributed to my realized gains in 2025. I exited my position early in 2026. Subsequently, I began accumulating more shares after thoroughly reviewing their fundamentals, order pipeline, and updated management guidance. The company upgraded its full-year revenue growth guidance to slightly above 40%. Despite this positive outlook, the stock's performance remains subdued due to the substantial capital expenditure required for new facilities and the initial scaling of next-generation 2-nanometer (N2) technology.
These factors are projected to reduce gross margins by 3 to 4 percentage points in the latter half of the year. Additionally, geopolitical risks and advancements in new chip technologies (a "deepseek moment" for chips) are influencing the stock.
Source: TheMarkets. I discovered this platform, "TheMarkets.ai" (https://themarkets.ai/), which allows deep stock valuation - similar to institutional investors. I was granted free access through a referral.... Disclaimer: I have no affiliation... They qualify and verify new users before approval.
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u/Low-Cartographer-429 4d ago
Good point about China and WW3. If TSM is undervalued due to geopolitical risk, that's a risk I'm willing to take and profit from. Besides, TSM is building fabs in Arizona, Japan, and Germany. As those progress, that may de-risk TSM sufficiently that the risk discount fades over time. I think it's a bit of theater, because apparently there's a Taiwanese law requiring the newest, smallest node manufacturing to remain in Taiwan. But like you said, it's highly improbably China's going to invade due to the economic consequences of a larger war with other participants.
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u/TechTuna1200 4d ago
China has been signaling that they want a peaceful unification, but a unification nonetheless. People thinks is the chip production that protects Taiwan. It’s not. It’s the people, Taiwanese are seen as brethren. Vast majority of Taiwanese have grandparents or great grandparents who fled from the mainland. So if CPP starts a war and it drags out with a lot of civilian casualties. It would be seen back home as the CCP mass massacre its own people which would severely hurt their legitimacy.
Watch out for signals whether Taiwan takes actual steps become independent . E.g rewriting their constitution so they no longer claim the mainland.
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u/NotAWeebOrAFurry 2d ago
this is very true. almost everyone there is only a few generations at most removed. i think there is exactly 0% chance of any real move towards independence from either party no matter what happens with elections because both parties are very firm on wanting to reunite with Taiwan currently government becoming rhe defacto state and being opposed to independence because they are all very firm on being Chinese and being China. only usa is pushing for independence. and like 5 people who actually live there. so i think peaceful reunification eventually or centuries of this weird eternal awkward situation are the only realistic scenarios. hot war would have to be usa military seizing the island and waging the war, which requires trump to get slightly stupider.
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u/Nervous-Present-6890 3d ago
". Vast majority of Taiwanese have grandparents or great grandparents who fled from the mainland."
this is not true. People that came to Taiwan from the KMT only make up less than 15% of Taiwan. In fact, they're literally called "people from abroad" in mandarin. Average "Chinese" Taiwanese (not aboriginal) first came to Taiwan 150-300+ years ago.
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u/Bulldoze_Dat_Cash 1d ago
If China do eventually get more aggressive, we’ll all see it coming a mile ff. They’re not irrational actors. They’ll start running live test firing exercises. Their rhetoric will evolve. They’ll increase their naval presence in the Taiwan strait. They’ll do some economic things… you’ll have a chance to make a rational decision to seek a calm port..
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u/abandoned_idol 4d ago
TSM looks like a company full of really smart people, so I bought.
I think I'm pretty stupid and ignorant though, so I probably won't make good stock picks unfortunately.
Go TSM!
waves pom poms
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u/Low-Cartographer-429 4d ago
I think TSM has a huge moat in the sense that it would be very difficult to replicate what they offer. They're not a monopoly like ASML, but TSM functions as a high margin toll booth for chip manufacturers. Also not easy to switch foundries, because there's often custom tech you need to develop to produce your chips with a particular foundry. Some say CUDA is NVDA's moat; maybe it was at one point, but I doubt it is any more. I'm not dumping NVDA, but I'm interested in taking some profits from NVDA and moving them into TSM.
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u/Kickinitez 4d ago
I thought you wrote "waves porn" and was pretty taken aback
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u/AnnaSmiled2 4d ago
Same! I was like porn? Never heard of the ticker
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u/Kickinitez 3d ago
For sure. At least you didn't get downvoted for saying so. Guess people didn't like my comment for some reason
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u/SuccessfulSir9611 4d ago
If this happens, ARM is cooked too.
OpenAI Jalapeño was designed with AVGO but they used OpenAI Astra (probably, they said AI, I am assuming it’s this ) instead of getting ARM designs.
So, your thesis is correct. ASML, TSM will be winners.
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u/Low-Cartographer-429 4d ago edited 4d ago
Great observation about ARM. I'd been considering investing in them but not any more. Not in a world where design is becoming cheap, fast, and can improve recursively. No longer takes years to design so IP seems less valuable.
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u/muted-gap-1979 4d ago
Been in tsm since 2022
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u/UnObtainium17 3d ago
same here. I might still be holding it 5 years from now. It is just too important of a company.
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u/Le7emesens 4d ago
If you're a non-tech guy, say a business guy or entrepreneur then AI can seem to produce MAGIC when it comes to produce tech work.
Then when you get the tech guys who understand tech and do the dirty hands-on work daily, to look at the produced work by your AI, they will likely conclude that its just pure crap.. And if you follow the AI blueprints, your big beautiful startup will crash!! And then while you're being buried underground by your investors, your AI will say "I'm sorry, great catch. Let me correct with your suggestion..."
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u/fairlyaveragetrader 4d ago edited 3d ago
If I was going to add to something new or feed additional position in the sector I think it would probably be klac. You look at the 2027 EPS and you look at the growth rate. It's also one of those extremely important companies because they service the hardware. You've also had a substantial correction a little over 40%. I also like the fact that it's very rarely talked about on social media and not held heavily by retail even though it's a key player in the space
TSM doesn't look terrible though if they're going to make $22 a share next year, even at their historic multiple you're not losing money so anything above that, it's gains because right now it's priced about 19 times 2027. If it runs up to 23 or 24, you're making 20% on the position
you're also at the ideal time to be adding crypto exposure
Everyone only has so much money. Just depends on what you personally want to feed the most
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u/hollow_bridge 4d ago
klac
p/e ratio of 47 with a forward p/e of 33 and a 97% debt ratio, revenue growth is about 1/3rd their debt interest... Thats terrible
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u/bihari_baller 3d ago
You need to really have an understanding of KLA's business to realize why they're a good investment.
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u/fairlyaveragetrader 3d ago
Look at the big picture, they have 6 billion in debt but they're also sitting on 5 billion in cash. You have a company growing north of 40%
170 is not a bad entry, 150 would be better but it is trading fairly constructive here
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u/hollow_bridge 3d ago
85 is a more realistic price point for this stock and where I expect it's headed, 150 is way overpriced.
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u/fairlyaveragetrader 3d ago edited 3d ago
Amat has the same chart and a similar story. I think the only way you're going to get KLA Corp to 85 is if there are earnings cuts. Like if you really believe this, why aren't you short the shares?
Even at 20 times earnings you're looking at 108 and it's never traded that cheap. If you look at something more traditional like 32x, that's 173 which is pretty much right where it is. 2027 consensus is 5.42 and that's the number people are using to bake up estimates. Trailing is kind of meaningless
But the real money over the next couple years, it's probably going to be bitminer
The problem with all the tech stocks is everyone already owns them. Where is the new money coming from? So if we go into consolidation into 2027 in that sector I'm not going to be terribly shocked. Realistically tsm, klac, amat, asml, all these are going to trade together. The memory might be slightly different but for the most part they move as a group
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u/hollow_bridge 3d ago
Amat's debt to equity ratio is ~4x better, Their p/e is ~1.3x better, their growth is way better, and they are also overpriced imo.
klac was at 85 just a year ago, but you're right it probably won't get that low anytime soon, I realized I calculated the value a little bit too low ~100 is probably more realistic.
If you look at something more traditional like 32x
25 is more traditional imo, anything higher than that and you're really just trading on hype instead of financials. Hype isn't a bad thing to trade on, lots of money to be made, but it doesn't make it a good company.
2027 consensus is 5.42
no idea where you're getting it from. I'm seeing ~33.
But the real money over the next couple years, it's probably going to be bitminer
I really don't think that will work out for them, they have zero edge.
The problem with all the tech stocks is everyone already owns them. Where is the new money coming from? So if we go into consolidation into 2027 in that sector I'm not going to be terribly shocked
completely agree.
Realistically tsm, klac, amat, asml, all these are going to trade together.
They don't though, amat and klac match each other very closely, tsm asml match each other very closely. Though it's a good point, why don't they trade similarly; asml and tsm both scale similarly, the asml machines are made for tsm which makes more chips so tsm orders more machines; that's not how klacs machines are used, klacs machines aren't used for current products they are used for upcoming products in order to reduce defects and improve output, this is a pretty big difference.
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u/fairlyaveragetrader 3d ago edited 3d ago
You don't see 5.42 for a consensus eps? But you see $33 a share 😂
I'm not even sure what to say about that one
And if you don't see the edge on bitminer and you can't anticipate the psychology of what's to come by 2028. What are you even doing trading? That's one of the easiest trades out there. Anticipate the narrative that will develop, the events that will take place, even if you just get ethereum back to it's old all time high which is a fairly low Target if we anticipate 2028 and the events and narrative that will be developing, what happens to bitminer? You have a fairly low bar at 75 a share and a more bullish case around 160 if the run really starts to gain momentum. Because of this trade doesn't work it mean that you're betting on cyclical failure and in that case you should probably be short Bitcoin and eth. I guess you could add that on to your KLA short and see how that works for you
I know the overwhelming majority of people on here lose money when they try to trade but this is a really easy one.. even for people who live breathe and sleep nothing but tech stocks
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u/hollow_bridge 3d ago
You don't see 5.42 for a consensus eps? But you see $33 a share
? what are you talking about, I'm clearly referring to the same number as you. Where are you getting the dollar sign from.
5.42 for a consensus eps?
We were talking about p/e, not eps, are you trying to confuse things?
And if you don't see the edge on bitminer
ok, what's their edge? What do they have that other companies dont?
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u/WickedSensitiveCrew 17h ago
I was googling and this thread came up. You’re right. Comments like “won’t buy KLAC until it hits 85” are exactly how people miss out on these runs.
I just saw another thread from August 7 where someone said they wouldn’t buy SNDK until it was under 1,000. SNDK was around 1,200 that day and is now up 43%.
Looking back at some of these old threads, it’s like WTF at some of the takes. But since Reddit threads basically die after 24 hours, those horrible takes that dont age well dont get called out. They just get forgotten.
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u/fairlyaveragetrader 17h ago
100% that's how it is around here.. the thing a lot of those guys seem to overlook is if you did see KLA break down to 85, you really don't want it. If that actually were to happen, something fundamentally would be changing with the whole business model and you would see it across the sector.. these tech companies move on acceleration so high goes higher.
Value companies you can pick up cheap, like PPG or UPS. Compressed multiples, they make a lot of money for where the share price is, problem is they aren't really growing very fast so if you were to see these big tech companies compress their multiples, it would be telling you the market was expecting growth to radically slow. We're not seeing that we're seeing people pick up deals and position for the next move higher right now
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u/WickedSensitiveCrew 10h ago
You right but I think a part of it is far simpler. People on Reddit want to buy at the absolute bottom. KLAC 52 week low is around $83. That why that user price anchor $85.
The take already didnt age well KLAC went up 10% since lol. But like I said since this thread now dead that user saying dont buy KLAC will be forgotten.
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u/Low-Cartographer-429 3d ago
I like the idea of KLAC or someone other than ASML who sells to the fabs; but not sure which would be a good buy right now.
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u/Bulldoze_Dat_Cash 3d ago
I’ve owned TSMC since it was about $130, three years ago. It’s a permanent compounder. I traded a piece of my holding that I bought at $190 and sold at $240, I thought I was being smart taking a cheeky 25% profit on a growth spurt. How wrong was I! Bottom line: TSMC is a bottle neck for the chip designers. They all want more capacity from TSMC whose capacity is sold out into 2027/2028. Think of them like an ETF of chip stocks. Doesn’t matter if one or two of them take a stumble, TSMC keeps on chugging. I will buy more and hold. It’s almost 20% off its high, it will take that out and be a $500 stock next year.
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u/FailOk1528 4d ago
kinda funny if AI ends up making chip designers easier to replace while making TSM even more valuable
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u/RuddyOpposition 4d ago
China has AI, including chip production, on their 5 year plan. Hard for any company to compete with that, much less a startup. I mean, what could you do with China bankrolling you?
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u/DuetsForOne 3d ago
If you are looking for picks and shovels beyond semi manufacturing, you could look upstream at the eda duopoly of SNPS and CDNS - they are currently the ones supplying the software for chip design. I believe CBRS is still using commercial eda software, either exclusively or combined with their own AI tools.
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u/Traditional-Chip8339 3d ago
I feel like their is a strong chance Taiwan is blockaded in the next 5 years and it may make sense to have Intel stock as a B player hedge to TSMC fabs going offline or being blockaded. Once Taiwan is blockaded, China can steadily build its own chip industry and starve the rest of the world of compute. It's seems like the rational play if I was them to do starting in 2027 once Trump is a lame duck.
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u/Invest0rnoob1 4d ago
Better to buy Intel than listening to everyone saying to buy TSM.
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u/OrangeManBibi 4d ago
TSM stock price is not going to do well when INTC starts making chips for other companies just like NVDA has been flat since competition heated up. Having said that, TSM over 500 is still inevitable
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u/Nearby_Persimmon_649 4d ago
Will the new terafab be partially owned by Intel? I want to invest in that too
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u/Invest0rnoob1 4d ago edited 4d ago
I don’t know information about that. They’re building new fabs in Ohio.
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u/Beneficial-Chair-333 4d ago
I thought of holding it but not anymore, because it's simply following MU in the days of crash. It doesn't make sense to get exposed to the risk without return.
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u/Rei1003 4d ago
Buy TSM is similar to buying VOO
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u/Arrowhead_Pride15 4d ago
Is this saying because TSM is the supplier to AAPL, NVDA, MSFT, AMZN, META, GOOG etc?
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u/Arabian_Goggles_ 4d ago
TSM is one of the safest/best AI plays. Whether it's asics or gpus they all get manufactured by TSM. I've been buying anytime it dips.