TSM is undervalued at $416 vs fair value $609; >46% upside expected in 12-18 months driven by AI manufacturing dominance, offsetting geopolitical cost pressures.

The first AI stock I will be showcasing in this video is Taiwan Semiconductor Manufacturing Company (TSMC). I have calculated the fair value of this stock at $609 per share , while the market price is only $416.

Therefore, I have calculated a growth rate of more than 46% for Taiwan Semiconductor Company's stock over the next 12 to 18 months. Of course, one of the biggest positive factors surrounding this company is technological innovation.

This goes beyond the scope of artificial intelligence.

Artificial intelligence is certainly thriving as a result of the big language models provided by ChatGPT, then Anthropic and Google’s Gemini , and now there are many big language model providers, whether open source or closed, large or small .

Various forms of these models are widespread, and Taiwan Semiconductor Company benefits from this as a result.

It is the manufacturing partner for companies such as Nvidia and AMD. It is also the manufacturing partner for companies like Apple.

Therefore, it benefits from this spread in expanding capabilities, not only for cloud data centers that provide computing services for large language models, but also for artificial intelligence on devices.

Devices such as smartphones, tablets, laptops and personal computers, and increasingly cars, are now widespread and incorporate advanced technologies built into them. All of this creates a surge in demand for Taiwan Semiconductor Company's services , and the company is, in my opinion, the best manufacturer in the world, quite simply.

Not only in semiconductor manufacturing, but in manufacturing in general. I have not come across a better company in its field of work than Taiwan Semiconductor Company.

Of course, the obvious negative factor surrounding TSM is geopolitical tension. This has already led to major strategic changes in how the company operates. Currently, the biggest geopolitical tension is between China and Taiwan.

China's ongoing threats against Taiwan and the potential negative consequences that could result if China takes action against Taiwan. But the company has already begun taking steps to diversify these risks, and this is already having a negative impact .

The management team has increased manufacturing presence outside of Taiwan. They have established a strong manufacturing presence in the United States around Arizona, and they are working to expand those facilities.

They also expanded into Europe and Japan. The management team stated that they are doing this to reduce geopolitical risks, and also because their clients are asking the company to do so, even after receiving incentives from the governments of the regions in which they are expanding .

The management team stated that production costs in those areas would be higher than production costs in Taiwan. Had it not been for these geopolitical tensions, the company would have focused on its manufacturing presence in Taiwan, expanding and improving that presence, and taking advantage of its competitive edge in being in a region that provides it with strong government support .

But now they are expanding outside their main region, and this is leading to higher costs. Therefore, they are already facing these challenges.

But despite these challenges, I see great upside potential here for Taiwan Semiconductor Manufacturing Company.