The TSMC seems to be perfect for AI value shares with 21x earning, and 21% growth rate with 1.8% dividends.
The TSMC creates significantly less free cash flows than its earnings.
Compare this to NVIDIA when 94% of the net income is supported by cold, hard free cash flow.
10 shares we like more than Nvidia ›
Recently, I was asked to offer artificial intelligence “without nonsense” investors focused on “real profits”. And with real profit, I mean actual free cash flows that remain with the company’s capital costs from its business cash flow, not just GAAP profit or even the Squishier Pro Form “NO GAAP (adjusted) income.
I will admit: my first thought was to recommend Taiwan’s semiconductor production company(NYSE: TSM)Taiwan’s winemakers power plant that makes most of Nvidia‘ (NASDAQ: NVDA) The work of the contract chip. However, the more I look at two promotions, the more I think NVIDIA shares can be a smarter PG game.
Image Source: Getty Images.
Why am I thinking that? After all, it depends on the numbers. Let’s start with the Taiwan semiconductor – TSMC – and why it looks very attractive on the surface.
As the world’s largest contract, TSMC has made $ 111.7 billion in the last 12 months. TSMC earned $ 47.5 billion net profit for this income – a stunning 42.5% net profit margin. According to analysts surveyed by S&P Global Market Intelligence, the TSMC will continue to increase by almost 21% over the next five years in the next five years.
Any shareholder can be purchased by any shareholder at a low and low price – only 21 times higher – undoubtedly cheaper than if you pay $ 53.2 billion in cash in the TSMC balance sheet.
Throw in a modest 1.8% dividend yield, and I would say that TSMC has not only the right growth-raying price (or flood), but not the semi-BAD dividend that needs to be launched.
And yet, if there is one reservations I have about TSMC, one of the reasons why I hesitate to buy Taiwan’s biggest success stories, even now, is that the company’s lead support in all competitors is internationally high because continuous capital costs shape and modernize TSMC Luxury factories.
Over the past 12 months, TSMC spent nearly $ 41 billion Capex, more than twice what it spent five years ago. With Capex depriving Capex, it turns out that the TSMC’s actual free cash flow has not been $ 47.5 billion in recent years, but in fact only $ 32.1 billion.
In other words, for every $ 1 ‘profit’ TSMC says it earned, in fact it only created $ 0.675 in real Cash Profit.
Now let’s compare TSMC with NVIDIA, that is the second largest TSMC customer (after An apple), this accounts for 10% of the annual income of TSMC.
Rated over $ 4.3 trillionNVIDIA has earned $ 76.8 billion in the last 12 months, giving it a $ 56.5 p/e ratio. It is almost 3x TSMC P/E, which looks extremely expensive for promotions, which are believed to grow “only” 30% annually in the next five years. At first glance, this indicates that the TSMC is both cheaper and smarter Ai investment.
And yet NVIDIA is useful to use TSMC to accurately create your tokens because The TSMC has a burden to make all the capital investments needed to apply NVIDIA business – facilitating this capital costs. As a result, much more net income reported by NVIDIA really means real free cash flows – what you will remember is the “real profit” sought by AI in the company.
According to S&P Global, NVIDIA has earned $ 72.1 billion free cash flows. These are still less than the company’s $ 76.8 billion, which has been reported by net income, but only about 6% less. In other words, NVIDIA earns every $ 1 profit, it supports the income with a revenue of almost $ 0.94 real free cash flows.
NVIDIA shares rated for free cash flows sell for almost 60 times. At 30% growth, this price NVIDIA shares are the upper range that most technology investors agree is the true value of the best growth shares – 2.0 EV/FCF/Growth ratio.
NVIDIA is not cheap stock. But if your goal is to have one of the best companies in AI space and you want to pay for it, you need a premium, nvidia is Uninteresting AI stock everyone should want to have.
Consider this before buying NVIDIA:
Motley Fool Stock Advisor A team of analysts just found what they think is 10 best stocks Investors to buy now … And NVIDIA was not one of them. 10 stocks that reduced the incision can return the monster in the coming years.
Consider when Netflix This list consisted of 2004. December 17th … If you have invested $ 1,000 during our recommendation, at our recommendation, You would have $ 656 895!* Or when Nvidia Made this list in 2005. April 15 … If you have invested $ 1,000 during our recommendation, at our recommendation, You would have $ 1,102,148!*
Now it is worth mentioning Share advisor The average return is 1 062%-S&P 500, compared to 184 percent. Share advisor;
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*The stock advisor returns from 2025. August 25
Rich Smith has no position in any of the above shares. The Motley fool is a position and recommends the production of Apple, Nvidia and Taiwan semiconductors. The Motley fool has a disclosure policy.
This AI stock is unfair to investors oriented in real profit
