TXN - TSM: Auto Chip Issues Highlight Long-Term Chip Demand

• The shortage in auto chips is due to pandemic-related supply chain issues, and the fact that auto chips always go to the back of the line behind the tech companies.
• It highlights the long-term demand growth for chip manufacturing capacity generally.
• Like many tech stocks, TSM’s price is inflated compared to historical valuations. The semiconductor business is highly cyclical, and this surge in demand will not last forever.
• But we may be in the middle of an historical valuation regime shift. The last one happened in 1983 after supply-side and banking deregulation. The impetus for the current surge is a huge bubble of household savings in 2020.
• Either way, TSM remains the best pick-and-shovel play to capture the long-term growth of chipmaking.

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