Investors in the chip space have fared well over the past year and a half. Soaring interest in AI technologies bodes well for any designer and manufacturer of semiconductor stocks.
Within that space, some companies have done better than others. What really matters for investors is finding which companies can continue to trend higher from here, and even become the leading play in the space.
For semiconductor stocks, the real story is insatiable chip demand. And that means that manufacturing plays could be the best performers.
That likely makes Taiwan Semiconductor (TSM) a top play going forward. Shares are up nearly 60% in the past year, but have far lagged some other names in the chip space.
As the leading manufacturer of chips, TSM profits no matter which chip company takes the lead in design. And with shares trading at 26 times earnings, TSM is still a relative value in a space that’s already had a big move higher.
Action to take: Investors may like shares here, or on any pullback. TSM pays a 1.5% dividend, but the real returns could come from a further rally in the years ahead as the AI chip buildout takes place.
For traders, shares are in a strong uptrend that looks likely to continue. The September $185 calls, last trading for about $6.50, could see mid-double-digit returns in the coming months.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.