I would think that selling (or choosing not to buy) a stock because their P/E is low because their CapEx is high is short-sighted unless you don't think their CapEx spending is going to pay off.
It's like...back in 2012, I was talking to one of my wife's relatives at a Christmas party. He said he'd never buy Amazon stock because they've never been profitable. I said they're not profitable because every dollar they make, they put back into R&D. He would have 10x his money now if he had bought their stock.
Software R&D may be less efficient then the above math would imply, but there is a big range between perpetuity and some depreciating time horizon. R&D can also boosts growth prospects by expanding markets.
Oof, that's the bit I forgot. TSMC's CapEx isn't just expansion, it's replacement. They're constantly upgrading to manufacture new technologies.
It makes sense now, thank you.
As usual with these ratio metrics, a full understanding of the industry, or at least understanding that you can't compare apples to oranges, is important.
Yes and no. If NVIDIA loses access to TSMC due to geopolitical events, presumedly their competitors do too. There might be a couple years where they face increased competition from their own used market if they're unable to produce chis competitive with the previous generations', but at some point Samsung et. al. will catch up on capability and capacity, and NVIDIA will be as well positioned relative to their competitors to take advantage of that as they are today. The only case where this would be significantly different is if one of NVIDIA's major competitors was independent of TSMC and thus could use the lean times for NVIDIA to leapfrog them; but that would require considering Intel a real competitor.
But, NVIDIA's heavily exposed to the LLM craze.
Do with that what you will.
It seems to me that they don't use their moat to really drive price. I don't know if it's cultural or what, but they could easily extract higher prices given their position. I seriously doubt Apple, AMD or NVDA would walk to another fab and give up a huge performance edge in their offerings.
While TSMC's gross margins are 60% which is already quite high, their customers also have close to 50% margins... which implies room for higher chip prices
I would put it as ~1% per year right now, but perhaps other investors see it differently.
https://www.metaculus.com/questions/11480/china-launches-inv...
https://www.metaculus.com/questions/5320/chinese-annexation-...
Production capacity losses might be realistic scenario and sales to west going down.
So a reasonable guess based on that assumption would be ~6.5% per year.
I'm not trying to be [overly] pedantic but HN is littered with comments basically just making shit up in a language of confidence and precision.
As you say, 1% versus 6.5% is a level of precision that isn't helpful. The way I prefer to think of it is that a Chinese invasion of Taiwan is sufficiently probable as to warrant making contingency plans for such an event, but not so probable as to warrant making active efforts to avoid Taiwan.
Taiwan is 30+Million people. I should imagine that would require a massive military undertaking.