Shares of Taiwan Semiconductor Manufacturing Company (TSM 1.03%) jumped 3% through 2:35 p.m. ET after CEO C.C. Wei told shareholders at the company's annual general meeting that TSMC expects to earn "record profit" in 2025.
Of particular interest to investors, Wei said he's "not afraid" that President Donald Trump's tariffs turmoil will keep TSMC from reaching this goal.
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TSMC and tariffs
"The impact of tariffs on TSMC is not direct," Wei said. "Tariffs are paid by importers. However, tariffs will make prices higher and could drag down demand." Regardless, "overall AI demand is still very high" -- indeed, higher than the production capacity to fulfill it. Thus, if U.S. buyers pull back on buying semiconductors manufactured in Taiwan, well, there are always other buyers elsewhere.
Long story short, Wei is confident his company can continue growing sales in the mid-20% range despite tariffs threats. Because even if supply eventually meets demand for artificial intelligence applications, new markets are forming to create even more demand for the company's chips.
Which markets? "The chip demand for humanoid robots starts now," declared Wei.
NYSE: TSM
Key Data Points
Is TSMC stock a buy?
So demand for TSMC's chips shouldn't be an issue. But should you demand to buy some TSMC stock?
Maybe.
On the one hand, a mid-20s growth rate compares favorably against a TSMC P/E ratio of only 24, suggesting TSMC stock is cheap. On the other hand, TSMC's free cash flow isn't quite as robust as its reported generally accepted accounting principles (GAAP) earnings suggest. The company reported $39.4 billion profit over the past year, but FCF was only $27.3 billion, meaning TSMC generated cash profit of only about $0.69 for each $1 in claimed profit.
With a price-to-free-cash-flow ratio of more than 31, TSMC still seems pricey to me.
