Foreign media sees strong reasons to buy TSMC stock before July

Despite a recent sharp decline in US tech stocks, foreign media outlet The Motley Fool is recommending TSMC (Taiwan Semiconductor Manufacturing Company) as a compelling buy before mid-July. The recommendation is based on the company's strong performance and its pivotal role in the artificial intelligence revolution.

TSMC is expected to release its second-quarter financial report in mid-July and monthly revenue data next week. The company's first-quarter results were impressive, with a year-over-year revenue increase exceeding 35% to $35.9 billion and a gross margin of 66.2%, demonstrating considerable pricing power. Analysts project over 30% revenue growth for the full year.

While TSMC's market capitalization recently surpassed $2 trillion, its price-to-earnings ratio remains around 27, and its price-to-sales ratio is just over 17, suggesting the stock is not overvalued given its future prospects. Although monthly revenue growth slowed in April after a record March, a further dip in May's sales could present a valuable entry point for long-term investors.

However, the report acknowledges potential risks. Heightened geopolitical tensions, particularly concerning US-China relations, could negatively impact the macroeconomic environment. Furthermore, TSMC's customer base is highly concentrated, with Nvidia and Apple contributing approximately 40% of its revenue, making it vulnerable to shifts in demand from these key clients. Despite these risks, the outlook for TSMC remains bright, with significant upside potential for patient investors, further bolstered by a projected 28% dividend growth in 2026.