Buying the Dip or Selling the Rally: Timing Your Moves in Boeing’s Stock

Posted on by The INO.com Team

The Boeing Company (BA), renowned for its innovation and dominance in the aerospace sector, has recently found itself in turbulent skies. In January 2024, the company faced severe criticism following an unfortunate incident involving a commercial Boeing 737 Max 9. During ascent, the door panel dislodged, resulting in a substantial opening on the side of the aircraft.

This unsettling event marked the start of a challenging year for BA in 2024 and brought renewed attention to the Boeing 737 Max planes, which have already been involved in two past crashes in 2018 and 2019, killing almost 346 people.

In addition, it also highlighted broader concerns about the quality control of BA’s planes, including how they are made, parts storage, and the rush to meet production deadlines.

According to an investigation by the Federal Aviation Administration (FAA), BA failed 33 out of 89 product audits related to its plane manufacturing, which is highly concerning. As a prominent commercial aircraft manufacturer, Boeing plays a crucial role in the aviation industry; however, its recent errors have raised significant concerns about the overall integrity of the industry.

As a result of this January mishap, which was followed by heightened scrutiny from the FAA, BA is experiencing a major production slowdown. The FAA has set a production limit of 38 jets per month for BA, but the actual output has often fallen well below this threshold, dipping to single digits by late March.

Conversely, Airbus SE (EADSF), BA’s major industry rival, maintains a comparably strong production pace for its A320neo-family jets, with an average of 46 flights per month in the first quarter of 2024. According to BA’s Chief Financial Officer, Brian West, the company is implementing various measures to tackle quality issues and boost confidence among stakeholders.

Despite BA's attempts to restore confidence in the company's prospects among its stakeholders, the recent news of BA’s CEO David Calhoun stepping down underscores the immense pressure BA is currently facing.

Furthermore, BA’s chairman, Larry Kellner, has opted not to stand for re-election as a board director. Instead, the board has chosen former Qualcomm CEO Steve Mollenkopf to take his place.

Meanwhile, Stan Deal, the CEO of BA Commercial Airplanes, is retiring, and Stephanie Pope, who has been serving as BA’s chief operating officer since January, will step into his role.

In a letter addressed to BA employees, Calhoun characterized the January Alaska Airlines incident as a critical juncture for BA. Highlighting his intentions to step down, Calhoun emphasized the global scrutiny the company is facing. The letter further assured stakeholders of the company's commitment to resolving the issues and guiding it toward recovery and stability.

Calhoun’s departure amid intense criticism from major airline CEOs further highlights the company's difficulties. For instance, some of BA’s key customers, including Michael O’Leary, the CEO of Ryanair, Europe's biggest airline, and Scott Kirby, the CEO of United Airlines, have expressed disappointment with BA’s quality issues and delivery delays.

CEO Scott Kirby of United Airlines referred to the Alaska Airlines incident as a tipping point in their plans to acquire the BA’s Max 10 this year as originally intended. Consequently, they are now exploring the option of purchasing aircraft from BA’s competitor, Airbus, to replace the Max 10s they had ordered.

Bottom Line

With its shares down roughly 23% over the past three months, there is no denying that BA is currently going through its worst-ever crisis. The company's future is uncertain as the company’s CEO steps down, and the successor remains undecided.

Meanwhile, BA's recent quarterly results exceeded analyst expectations. The airline company reported fourth-quarter revenue of $22.02 billion, surpassing the $19.98 billion revenue in the prior year quarter and the consensus estimate of $21.08 billion.

During the same quarter, the company reported a non-GAAP core loss per share of $0.47, an improvement from the loss per share of $1.75 in the prior-year quarter and lower than analysts' estimate of $0.79. However, its free cash flow dropped 5.8% from the year-ago value, reaching $2.95 billion.

The company has reaffirmed its financial targets for 2025 and 2026, which include reaching approximately $10 billion in free cash flow and achieving $100 billion in revenue by as early as next year.

Despite exceeding analyst expectations for the fourth quarter, BA’s forthcoming quarterly results could hinder the company’s financial goals due to production delays and major airline customers choosing to procure aircraft from Airbus.

Furthermore, the company’s decision to withhold 2024 guidance during the recent earnings highlights the uncertainty surrounding its commercial airplane deliveries for this year. This uncertainty, ongoing production challenges, leadership shakeup, and customer preference shifts cast a shadow over BA’s prospects.

To that end, investing in BA’s shares might not be wise now. Investors could monitor the company for further developments and wait for clarity on its future direction.

Anticipating Bitcoin's Halving Event and Investment Implications

Posted on by The INO.com Team

The cryptocurrency market remains highly active lately as investors are increasingly interested in new spot bitcoin (BTC) exchange-traded funds ahead of the upcoming bitcoin halving event in April. This event typically generates significant attention and anticipation in the crypto market.

Simultaneously, there’s a growing focus on the global digital asset regulatory environment. Last month, European regulators passed new anti-money laundering legislation, and the U.S. Securities and Exchange Commission (SEC) has initiated actions that could lead to Ethereum (ETH) being classified as a security ahead of a critical May deadline on various spot Ethereum ETF applications.

Historically, the period from February through April has shown strength in bitcoin prices, and investors are optimistic that the crypto rally observed in early 2024 will extend into the second quarter.

The cryptocurrency market has continued its strong upward trend this year, building on the significant gains seen in 2023, when Ethereum surged by 85% and bitcoin by more than 150% in 2023. Heading into April, bitcoin prices are up about 64% year-to-date, and Ethereum prices have rallied more than 51%.

During the first half of March, bitcoin prices surged to reach a new intraday all-time high of $73,750.16. However, the latter part of the month saw bitcoin trading within a broad range of approximately $60,000 to $72,000. By the end of March, bitcoin prices closed at $70,849, marking a monthly gain of 14%.

In contrast, Ethereum prices experienced a more modest increase of 5.8% for the month, ending at $3,611.

Spot Bitcoin ETFs in the Spotlight

Bitcoin’s price surged above $71,000 multiple times last week, and this increase was supported by significant net inflows exceeding $243.4 million into bitcoin exchange-traded funds (ETFs) on Thursday.

Notably, the Ark 21Shares Bitcoin ETF (ARKB) recorded net inflows of $200.7 million last Wednesday alone, making it the third bitcoin ETF to surpass the $200 million mark since the SEC approved the listing and trading of 11 spot bitcoin exchange-traded product (ETP) shares after years of repeated rejections in January.

Before ARKB, BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity Advantage Bitcoin ETF (FBTC) crossed this $200 million mark in a single day.

According to James Wo, founder and CEO of Digital Finance Group, the spot bitcoin ETFs continue to play a central role in the 2024 crypto rally.

“Bitcoin broke past its all-time high in March as the bitcoin ETFs saw a daily net inflow of over $1 billion, an amount higher than the inflow experienced from the launch date. As more participants seek to gain exposure to cryptocurrencies, the bitcoin ETFs provided easier access to this asset class, which fueled the strong demand in March, pulling up the rest of the crypto market with it,” Wo stated.

Bitcoin Halving Event: The Primary Catalyst for a Prolonged Climb in Cryptocurrency’s Value

Bitcoin’s recent surge and its overall value proposition are primarily driven by increasing anticipation surrounding the upcoming “Bitcoin halving” event, scheduled to occur on April 19, 2024. This event is a built-in feature of Bitcoin’s protocol that reduces the rate of bitcoin production, with the block reward expected to decline from 6.25 BTC to 3.125 BTC.

The halving event holds significance on multiple fronts. Firstly, it directly impacts the economics of Bitcoin mining. As the block reward decreases, miners earn fewer Bitcoins, potentially affecting the profitability of mining operations. This could lead some miners to cease operations if mining costs outweigh the rewards, resulting in adjustments to the network’s hash rate and mining difficulty.

Additionally, the halving sparks heightened speculation and interest from investors and traders. Historically, Bitcoin halving events have been linked to bull markets and price surges due to reduced supply and sustained or increased demand. The halving underscores Bitcoin’s deflationary nature and scarcity. With the issuance rate halved, Bitcoin becomes scarcer over time, potentially driving up demand and long-term price appreciation.

Historically, halving events have led to substantial price increases for Bitcoin. For instance, after the 2012 halving, Bitcoin’s price surged from $12 to over $900 within a year. Likewise, following the second halving in 2026, the price climbed from about $600 to $2,500.

Further, the third halving event held in May 2020 saw the price jump from around $8,000 to over $40,000 within a year.

In the past, bitcoin’s price typically showed stability before its halving events, often due to an uptick in supply available on exchanges. However, this time, there’s a notable difference, as pointed out by Austin Arnold, a crypto market analyst and the founder of “Altcoin Daily.”

He added that an unprecedented level of excitement and institutional fear of missing out (FOMO) surrounding Bitcoin, fueled by a quest for inflation-resistant assets, contributes to a potential supply-and-demand shock even before the actual halving occurs.

Arnold further projected a doubling of Bitcoin’s price within a year post-halving, potentially reaching between $100,000 and $150,000, guided by the fundamental principle of supply and demand dynamics.

Bottom Line

Several major cryptocurrencies experienced a rally lately, fueled by various potential catalysts such as significant net inflows into bitcoin ETFs, notable filings for spot Ether ETFs, and anticipation surrounding the upcoming “bitcoin halving” event scheduled on April 19.

The bitcoin halving event, which is the fourth in bitcoin’s history, with prior halvings in 2012, 2016, and 2020, involves cutting miners’ rewards in half to control the introduction of new bitcoins until the maximum limit of 21 million bitcoins is reached. Historically, bitcoin’s price has surged after each halving event, leading investors to speculate on a potential rally next month.

Analysts speculate that the current Bitcoin price of around $66,000 could potentially reach approximately $150,000 post-halving, highlighting the anticipation and impact of this event on Bitcoin’s market dynamics. The halving event brings significant attention to the crypto space, attracting new investors and contributing to increased trading activity.

While Bitcoin halving events have been associated with bull markets and substantial price rallies, past performance does not indicate future results. So, investors should exercise caution and conduct thorough analysis before making investment decisions, as the crypto market is known for its volatility and unpredictability.

Microsoft (MSFT): Analyzing Investor Opportunities Amidst New Generative AI Tools

Posted on by The INO.com Team

The enthusiasm for the transformative potential of generative artificial intelligence (AI) is mounting. Companies from various sectors are actively exploring its applications, be it enhancing worker productivity, facilitating communication with stakeholders, or streamlining operational processes to foster efficiency and growth.

Despite widespread adoption among other C-suite executives, many traditionally cautious CFOs hesitate to embrace generative AI. Concerns over return on investment (ROI) and cost containment persist, hindering their full engagement in leveraging this technology's potential benefits.

According to the CNBC CFO Council survey for the first quarter of 2024, only a third of respondents anticipate increased capital expenditures over the next year. Of this group, merely 7% intend to allocate funds toward new AI capabilities, ranking lower than other investment priorities like market expansion or facility development.

Yet, a suite of specialized tools tailored for CFOs and finance teams is emerging from various business software providers. Microsoft Corporation (MSFT) is at the forefront, launching Microsoft Copilot for Finance. The tool empowers financial professionals within Microsoft 365, offering AI-driven support for critical decision-making processes.

Cory Hrncirik, modern finance lead at MSFT, has emphasized the significance of leveraging generative AI to blend structured and unstructured data sets. He asserts that comparing data from different systems is “something every finance team on the planet does a lot of.”

Furthermore, MSFT’s Copilot drastically reduces the time spent on reconciliation tasks for thousands of financial planning and analysis professionals. Previously, individuals would allocate one or two hours weekly to this process, whereas with Copilot, the task now only demands 10 to 20 minutes.

MSFT’s commitment to advancing business applications through AI-driven solutions underscores its dedication to addressing challenges organizations face. Copilot for Finance represents a significant step forward in empowering finance professionals to navigate complexities and drive success in today’s dynamic business landscape.

Strategic Collaborations and Expansion Avenues

MSFT’s commitment to AI extends beyond individual projects, encompassing strategic collaborations to bolster its AI capabilities. One such venture is the proposed “Stargate” project with OpenAI, involving a $100 billion investment to construct a massive supercomputing cluster supporting advanced AI models.

For perspective, MSFT’s expenditure on building clusters for training OpenAI’s GPT-4 model exceeded several hundred million dollars. OpenAI, in turn, is currently developing a successor to GPT-4, likely named GPT-5, utilizing MSFT’s existing data centers.

In parallel, data security firm Rubrik is eyeing a New York Stock Exchange listing, aiming to raise $500 million to $700 million. Backed by MSFT, which has held a stake in Rubrik since 2021, the IPO underscores the company's interest in expanding its presence in data security.

Moreover, MSFT and NVIDIA Corporation (NVDA) have deepened their collaboration, integrating NVIDIA’s generative AI and Omniverse™ technologies into Microsoft Azure, Azure AI services, Microsoft Fabric, and Microsoft 365. The partnership aims to provide customers with comprehensive platforms and tools across the Copilot stack, facilitating breakthroughs in AI capabilities.

From introducing the GB200 Grace Blackwell processor to Azure to enhancing integrations between DGX Cloud and Microsoft Fabric, these initiatives underscore MSFT's commitment to empowering customers with radical AI solutions spanning hardware and software domains.

Upbeat Financial Results Serve as Evidence

In the fiscal 2024 second-quarter earnings release, MSFT reported a remarkable 33% surge in profit for the October-December quarter, propelled by substantial investments in artificial intelligence. The company's focus on AI within its cloud-computing unit drove significant growth, surpassing Wall Street expectations.

MSFT’s earnings per share for the quarter came in at $2.93, beating the consensus estimate of $2.77. Its revenue stood at $62.02 billion, surpassing analyst expectations of $61.13 billion and up 17.6% year-over-year.

In addition, the company's cloud-centric segment witnessed robust growth, with revenue climbing 20% year-over-year to $25.88 billion. Office Suite and LinkedIn revenue grew by 13% year-over-year to $19.25 billion, and the personal computing business, including Xbox, surged by 19% to $16.89 billion, notably bolstered by the addition of Activision Blizzard.

Jeremy Goldman, director of briefings at Insider Intelligence, has hailed MSFT as a frontrunner in the AI realm, predicting its potential to expand into digital advertising. His firm anticipates the company's worldwide ad revenues to reach $14.93 billion, reflecting a 12% increase this year.

Looking ahead, Wall Street expects MSFT's revenue to increase 15.3% year-over-year to $244.34 billion for the fiscal year ending June 2024. Moreover, the company's EPS is estimated to rise 19.2% from the previous year to $11.69. Furthermore, MSFT has topped the consensus revenue and EPS estimates in all four trailing quarters, which is impressive.

Bottom Line

With staggering market projections, artificial intelligence is poised to become the paramount Next Big Thing. Statista forecasts the AI market to hit approximately $305 billion this year and nearly $740 billion by 2030, although some skeptics argue it’s mere hype.

Notably, Wall Street analysts pinpoint MSFT as a major beneficiary of the AI surge. CEO Satya Nadella emphasized the company’s wholehearted embrace of AI, citing its integration across the entire data stack and its substantial productivity enhancements.

Wedbush tech analyst Dan Ives has raised MSFT’s price target to $500 from $475, citing the transformative potential of Copilot and the accelerating adoption of AI technology. He anticipates a significant increase in Azure cloud deal flow as AI applications proliferate throughout the enterprise landscape.

Ives predicts that 70% of MSFT's enterprise base will utilize AI-driven functionality within three years, fundamentally altering the company's trajectory. He estimates Copilot alone could contribute $25-30 billion to the company’s revenue by 2025, underscoring its pivotal role in its growth.

Concurrently, Bank of America Corporation (BAC) maintains a bullish outlook on MSFT, labeling it a “top pick” with a buy rating and a $480 stock price target. Also, Jefferies Financial Group Inc. (JEF) analyst Brent Thill echoes this sentiment, raising the price target to $550 and affirming MSFT as the leading AI player, poised to capitalize on transformative opportunities in infrastructure and applications.

Given these factors, MSFT emerges as a compelling investment choice with the potential for substantial returns amid the burgeoning AI landscape.

Evaluating Buy and Sell Opportunities Post Visa-Mastercard's $30B Deal

Posted on by The INO.com Team

Visa Inc. (V) and Mastercard Incorporated (MA) recently made headlines with a settlement estimated at $30 billion, marking a significant development in the U.S. retail and banking sectors. This antitrust settlement, one of the most significant in U.S. history, addresses long-standing disputes over credit and debit card fees stemming from a nationwide litigation that started in 2005.

V and MA have consented to various alterations in the short run as a component of the resolution. They agree that companies could decrease interchange rates - the charge merchants must pay for managing a credit card payment, also called “swipe rates” - by a minimum of 4 basis points (0.04 percent units) for three years. Swipe rates need to be seven basis points less than the average during the next five years.

In addition, it will become easier for merchants to guide customers toward other payment methods, and they can apply extra costs to premium credit cards with higher swipe fees. The settlement is still under the court’s endorsement and won't take effect until late 2024 or 2025.

Anticipated Impact on Merchants and Consumers

Patrick Payne, an assistant professor in personal and family financial planning at the University of Arizona in Tucson, does not expect “dramatic changes” from this agreement but thinks it might make premium cards more costly.

The cards are already costly. For example, the Chase Sapphire Reserve requires an annual fee of $550, but it offers benefits such as access to airport lounge membership and a $300 yearly travel credit. The annual fee for the American Express Platinum Card is almost $700.

Premium cards are more expensive for merchants, too. According to the National Retail Federation, swipe fees typically range around 2% per transaction but can go up as high as 4% for premium rewards cards. If the settlement gets approved, merchants will have the right to charge their customers extra when using premium Visa and Mastercard credit cards.

However, it's not certain whether stores will agree to increase the costs for these customers. Demanding an additional surcharge from specific customers, especially those who pay a lot, might harm relationships and business.

Now, what does it imply for the consumers, the ones who are actually swiping their cards? Probably not a lot, according to experts. “We’ll need to wait and see,” stated Ted Rossman, a senior industry analyst at Bankrate. “My honest assessment is that I don’t think this is a big deal for any party involved,” he said.

Rossman said the settlement’s impact is not much because it lowers swipe fees by less than 1% for a few years and caps the rates for five years. “That’s such a minimal change that I don’t think it’s going to make a big impact,” he remarked.

That said, critics argue that even though this new rule might control market powers, it does not necessarily solve issues related to dominance and setting fees.

Beverly Harzog, the writer of “The Debt Escape Plan: How to Free Yourself from Credit Card Balances, Boost Your Credit Score, and Live Debt-Free,” shared that she doesn't think there will be much alteration among credit card issuers following the agreement. This is partly due to alterations not being a “permanent fix.”

She mentioned how three- and five-year spans allow very little time for these firms to implement substantial changes.

Additionally, Rossman adds that the settlement is “a flash point in a larger war,” maybe the most crucial fight yet is about the Credit Card Competition Act. Democratic Senator Dick Durbin from Illinois suggested this law, and it might bring in more competition to this area.

Rossman believes that if Durbin’s bill becomes law, it would significantly affect the financial sector more than the recent settlement. He also mentions how improbable it is for this bill to be approved at the present time. “That's the type of thing that could really change credit cards,” he added.

Bottom Line

Visa and Mastercard are notable players in the consumer financial industry. They are primarily known for their dominance in high-margin businesses, characterized by a consistent increase in revenue and profit fueled by consumer spending. This aspect has garnered significant popularity among investors, as both V and MA stocks have delivered impressive returns over the years.

V and MA have not provided specific details on how the recent settlement could impact their performance in the coming years. Investors may have to wait for their next quarterly reports to gain more insight.

While both companies are financially strong enough to handle the effects of the settlement, the potential savings of $30 billion for merchants over five years translate to a significant annual impact of $3 billion for each firm. This could have substantial implications, potentially resetting revenue levels lower than their current status and leading to slower growth rates.

Besides interchange fees as the primary income source, V and MA earn money from other places, such as small-business solutions. However, most of their revenue still comes from interchange fees.

Despite these potential challenges, the fundamental business model of Visa and Mastercard remains unchanged. However, the settlement’s financial impact underscores the need for investors to closely monitor developments and assess how they could influence the companies’ financial performance and growth trajectory moving forward.

Additionally, regardless of the settlement’s unknowns, V and MA shares still trade at premiums over their peers. For instance, V’s forward non-GAAP P/E of 28.08x is 162% higher than the industry average of 10.54x. Also, its forward EV/Sales and EV/EBITDA multiples of 15.70 and 22.23 compared to respective industry averages of 3.02 and 10.52.

Likewise, MA’s forward non-GAAP P/E of 33.24x is 215.4% higher than the industry average by 10.54x. Additionally, the stock’s forward EV/sales and EV/EBITDA multiples of 16.12 and 26.24 unfavorably compared to the industry averages of 3.02 and 10.52, respectively.

Moreover, both V and MA exhibit notable volatility, with V boasting a 60-month beta of 0.96 and MA standing at 1.08. Considering these factors, investors may benefit from waiting for further clarity on the settlement's repercussions before scooping up shares of V and MA.

Is Taiwan Semiconductor Manufacturing (TSM) The Backbone of AI Chip Manufacturing?

Posted on by The INO.com Team

The semiconductor industry is experiencing an unprecedented buzz at the moment. In March, KPMG unveiled its 2024 Global Semiconductor Industry Outlook after surveying 172 executives in the field. A staggering 85% of these individuals projected a double-digit increase in the industry’s revenue in 2024.

The automotive industry, artificial intelligence (AI), and microprocessors remain the primary catalysts for growth in the semiconductor sector. Notably, NVIDIA Corporation (NVDA), a leading vendor of graphics processing unit (GPU) components essential to powering cutting-edge AI systems, has emerged as a prominent beneficiary due to its strong market position.

Another tech stock, Taiwan Semiconductor Manufacturing Company Limited (TSM), also seems well-positioned to ride the AI wave. Also known as TSMC, the company is the largest contract semiconductor foundry globally, with a market cap of $705.69 billion. It oversees production for many renowned chip designers, such as NVDA, Apple Inc. (AAPL), and Advanced Micro Devices, Inc. (AMD).

TSM is dominant in the third-party chip manufacturing sector, claiming over 50% of the market share. This immense power grants the company significant influence within the semiconductor industry, particularly in the realm of AI chips. TSM takes charge of approximately 90% of advanced chip production for third-party companies, making its role crucial for AI models reliant on such technology.

Furthermore, TSM is currently overcoming a previous downturn in the semiconductor sector and experiencing an upturn in growth, aided by advancements in artificial intelligence. On March 8, the company disclosed a consolidated revenue of NT$181.65 billion ($5.68 billion) for February 2024, representing a rise of 11.3% from February 2023.

Moreover, TSM’s January through February 2024 revenue reached NT$397.43 billion ($12.43 billion), showcasing a noteworthy surge of 9.4% compared to the corresponding period in 2023.

In addition, as of December 31, 2023, the company's cash and cash equivalents amounted to $47.66 billion, up 9.1% year-over-year. Moreover, as of December 31, 2023, total assets grew 11.4% year-over-year to $179.93 billion. TSM’s strong liquidity position provides resilience, flexibility, and opportunities for growth and value creation, enhancing the company’s financial health and competitiveness in the market.

Strategic Investments and Expansion Plans

TSM has been actively investing in strategic initiatives to fortify its global dominance in producing cutting-edge semiconductor chips. It boasts a staggering 90% share in manufacturing these highly coveted chips, integral to the functionality of various devices, including smartphones and AI technology.

Although there may be a few geopolitical uncertainties impacting TSM, with the company having its headquarters in Taiwan, which China asserts as part of its territory, it is actively expanding its operations beyond Taiwanese borders.

Recently, TSM unveiled its inaugural fabrication plant in Kumamoto, Japan. Plans are also underway to inaugurate two $40 billion facilities dedicated to producing advanced microprocessors in Phoenix, Arizona. Additionally, TSM has committed $3.80 billion to establish a fabrication plant in Dresden, Germany, marking its first establishment in Europe.

Furthermore, NVDA plans to introduce advancements to its H100 and GH100 models in the second quarter of 2024 - the H200 and GH200. It has also debuted the B100/B200 and GB200 on its Blackwell platform during GTC. These chip offerings will significantly enhance operations for NVDA’s AI GPU’s sole maker -TSM.

AMD predicts that the market for AI GPUs will reach $400 billion by 2027, with a CAGR of 70%. TSM has already committed substantial capital expenditures to increase its production capacity and meet customer demands in this expanding market.

TSM’s management anticipates that the fiscal 2024 first-quarter revenue will range from $18.0 billion to $18.8 billion. The company’s gross profit margin could fall between 52% and 54%, while its operating profit margin is expected to range from 40% to 42%. Its 2024 CapEx guidance of $28 billion to $32 billion indicates a strategic shift where the rate of capital spending growth is stabilizing as TSMC capitalizes on its growth opportunities.

TSM plans to manage its capital with a focus on several key objectives: funding organic growth, ensuring profitability, maintaining financial flexibility, and delivering sustainable and increasing cash dividends to shareholders. Owing to diligent capital management, TSM's Board of Directors authorized in November 2023 to increase the cash dividend for the third quarter of 2023 from NT$3 ($0.09) to NT$3.50 ($0.11) per share.

From now on, this will be the new minimum quarterly dividend level. The cash dividend for the third quarter of 2023 will be paid out in April 2024.

Moreover, TSM’s shareholders received a cash dividend of NT$11.25 ($0.35) per share in 2023, and they will receive a minimum of NT$13.5 ($0.42) per share in 2024. In the coming years, the company anticipates a shift in its cash dividend policy, moving from maintaining sustainable dividends to steadily increasing cash dividends per share.

Bottom Line

Investors aiming to capitalize on the AI boom should prioritize investing in companies that play an indispensable role in developing and promoting AI technologies. Focusing on foundational players in the chip industry is crucial as these companies are well-positioned to drive and benefit from AI advancements in the long term. One such promising industry player is TSMC.

Though TSM does not immediately appear as an AI staple, its role in the AI pipeline is paramount and arguably on par with any other enterprise. Data centers rely heavily on GPUs, which serve as the neural center of AI computing systems. The process heavily relies on TSM's exceptional manufacturing processes and the semiconductors that it produces for its client companies.

TSMC’s chief executive officer, C.C. Wei, foresees the company’s AI-centric chip revenue to expand at a CAGR of 50%. By 2027, he projects AI chips to make up a high-teens portion of the company’s revenue.

With its operations well-suited to leverage the ongoing AI wave, TSM’s stock has surged more than 57% over the past six months. Positioned firmly with a proven track record of success, strategic investments, and a flourishing market for AI-based chips, TSM presents an appealing opportunity for investors seeking substantial returns.