Answering a caller’s query about Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) during the lightning round of the October 1 episode, Mad Money host Jim Cramer commented:
I like Taiwan Semi. Now, look, obviously, I’m an NVIDIA devotee, but Taiwan Semi is such a great company… Buy that.
It is one of the stocks Jim Cramer shared his thoughts on as he discussed Big Tech’s AI spending during a May episode.
Advanced Chips Continue to Drive Demand
Taiwan Semiconductor Manufacturing Company Limited reported second-quarter revenue of $40.20 billion, up 33.7% year-over-year in U.S. dollar terms. Net income increased 77.4% to NT$706.56 billion (NT$1 = US$0.032), while gross margin reached 67.7%. Technologies at 7 nanometers and below generated 77% of wafer revenue, demonstrating the importance of advanced manufacturing to its business.
More recent monthly figures show continued momentum. August revenue reached approximately NT$514.81 billion, an increase of 53.3% from a year earlier. Revenue for the first eight months rose 39.3% to approximately NT$3.39 trillion. These figures provide a more recent picture of demand ahead of the company’s next quarterly report.
The shares also trade below a listed foundry peer on forward earnings. TSMC trades at approximately 21.4x forward earnings, compared with about 18.8x for GlobalFoundries. The comparison has limits because the companies serve different technology markets, but TSMC commands the higher forward earnings multiple.
TSMC is one of the stocks with strong FCF and low debt.
Expanding Capacity Comes With a Large Bill
Taiwan Semiconductor Manufacturing Company Limited must spend heavily to support that demand. Management raised its 2026 capital expenditure budget to $60 billion – $64 billion, which shows the expectations for sustained AI and high-performance computing investment. The spending also brings near-term profitability pressures. Management expects the initial ramp of 2-nanometer production to reduce second-half gross margin by approximately 3 to 4 percentage points. Overseas factories are another source of dilution, with an expected impact of 2 to 3 percentage points in their early stages, potentially widening to 3 to 4 points as the overseas expansion progresses. These investments can support future revenue while weighing on margins during their development.
For the third quarter, the company guided to revenue of $44.6 billion – $45.8 billion and gross margin of 65% – 67%, below the second-quarter margin despite higher expected sales. Investors need to distinguish growth in manufacturing demand from the profitability of bringing additional capacity online.
Broad Hedge Fund Ownership and Limited Short Exposure
There were 249 hedge funds holding Taiwan Semiconductor Manufacturing Company Limited as per Insider Monkey’s second-quarter database, compared with 234 in the previous quarter. Short interest represented 0.57% of the public float. Cramer’s comment comes as TSMC continues to turn advanced-chip demand into substantial sales and earnings growth. The company is committing considerable capital to keeping that business expanding. Shareholders have strong recent demand figures to work with, but they will also want to see the new factories and technologies earn their way through the initial costs.
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