Overlook the “Magnificent Seven.” What In regards to the Unbelievable Eight?

The “Magnificent Seven” was a phrase coined by CNBC’s Jim Cramer to group essentially the most dominant shares available in the market. The seven shares are:

1. Microsoft
2. Apple
3. Nvidia
4. Alphabet
5. Amazon
6. Meta Platforms
7. Tesla

Whereas it is a strong listing, I imagine it leaves out one extremely necessary enterprise. In reality, if this firm did not exist, these seven firms would not look the identical.

So, as an alternative of the Magnificent Seven, I am proposing the Unbelievable Eight, which provides Taiwan Semiconductor (TSM 0.82%) to the cohort.

Taiwan Semiconductor’s product innovation has saved it on prime of its {industry}

With a $900 billion market cap, TSMC is definitely the seventh-largest firm listed on U.S. exchanges — bigger than Tesla’s $585 billion.

Taiwan Semiconductor is a chip foundry, which means firms design chips after which outsource the manufacturing to Taiwan Semiconductor, which has the experience to create them. The corporate is the market chief on this house and has industry-leading 3 nanometer (nm) chip expertise that permits it to fabricate essentially the most highly effective chips attainable proper now. Moreover, TSMC has a tradition of steady innovation, and the subsequent era of 2nm chips is slated to launch someday in 2025.

Though TSMC does not title all its purchasers, each member of the Magnificent Seven is both a direct or oblique buyer. That is an incredible place to be in, and a TSMC funding provides traders an opportunity to learn from all technological improvements made by the unique Magnificent Seven.

And a number of catalysts are in line to spice up its enterprise.

TSMC is about to expertise two vital tailwinds

In Apple’s newest announcement, it launched Apple Intelligence, its tackle synthetic intelligence (AI). On this announcement was the kicker that solely the newest era of iPhones and newer may have entry to this expertise, so shoppers should improve to achieve entry to this function. Over the previous three years, Apple primarily made up 1 / 4 of TSMC’s income, so if this ignites an improve cycle, TSMC will likely be an enormous beneficiary.

This can be a huge reduction, as 38% of TSMC’s income within the first quarter got here from the smartphone section, which noticed its quarter-over-quarter income determine drop by 16%. Given how necessary smartphones are to TSMC’s enterprise, it is vital that this space turns round.

Nonetheless, one other division, AI, can be beginning to shine. Administration tasks a 50% compound annual development charge (CAGR) for the subsequent 5 years with AI-related {hardware}. After that catalyst is full, it tasks it can make up round 20% of whole income.

That is huge development from a section that’s simply rising, and it is vital to get in earlier than the lion’s share of that development happens.

Each elements give credence to administration’s long-term purpose of rising income at a 15% to twenty% CAGR for the foreseeable future.

It is uncommon to discover a firm that constantly delivers that sort of development over the long run, however Taiwan Semiconductor is well-positioned to do it. Because of this, I feel it is among the best shares to purchase now and maintain for the long run.

One slight caveat to this pitch is that Taiwan Semiconductor’s inventory is not the most affordable at 28 instances ahead earnings.

TSM PE Ratio (Ahead) knowledge by YCharts

Nonetheless, contemplating that different Magnificent Seven members like Apple, Microsoft, Amazon, Nvidia, and Tesla commerce at a lot increased multiples, it is nonetheless a good worth to pay.

Taiwan Semiconductor’s long-term trajectory is simply too good to disregard, and each investor ought to think about proudly owning some shares. Though I do not know if the Unbelievable Eight will grow to be a development, I feel including Taiwan Semiconductor to this cohort is sensible.