assalamu alaikum everyone I hope you are doing well today is friday july twenty fifth and we ended today a pretty strong day in the markets or pretty strong week rather in the markets overall so looking at the indices We were up point three seven percent on the Russell today. The Dow Jones was up close to half a percentage point. The S&P was up point four percent. The Nasdaq was up point two three percent. And in terms of. Major names for stocks that we like to look at. Tesla was up three point five percent. Pretty strong recovery after yesterday, after yesterday's drop. They did mention that they were expanding their Robotaxi experiment to California, which is fantastic, specifically the Bay Area. And as I said yesterday, as I said in the Discord private group, I expect an aggressive exponential rollout for Robotaxi. Elon Musk was saying it may be available to up to half the population of the United States by the end of the year. If that is the case, even if we have to wait on Robotaxi impact to appear in financials until maybe late October, next year even if that's the case the fact that it is rolling out at this very aggressive pace I think will be enough to change sentiment about this stock for investors because ultimately investing is a forward-looking exercise it's not about what is happening right now or what happened in the past it's about what we think is going to happen in the future And it doesn't really need much foresight to see if Robotexy is being rolled out in all these different geographies, what that's going to mean for the bottom line of this company eventually. Some of the Bitcoin-related stocks took a bit of a breather. MicroStrategy down two percent, Bittier down three percent, CleanSpark down four percent. Today, we're going to talk about Taiwan Semiconductor Manufacturing Company. This is a company that has been on a tear as of late. Hamdulillah, it's a company that we hold in our dividend portfolio and we've done well on. Bitcoin is at one hundred and seventeen thousand, Solana at one eighty five. Doge is back at twenty three cents, twenty three and a half. And Pudgy Penguins is at point zero three eight. All right. So let's talk about Taiwan semiconductors. That's my beautiful self. When is enough? That is to say, when is it time to take profits? Is it time to take profits right now on Taiwan semiconductor? Surely the type of growth that we've experienced so far isn't sustainable. Well, first, let's talk about what Taiwan Semiconductor actually does. So this is a company that's based in Taiwan. That's a big point about Taiwan Semiconductor. And I think if it wasn't based in this geography, then it would probably be valued a lot more than it is right now. And they have been trying to... basically diversify their geographical footprint for obvious reasons. The tension between China and Taiwan is no secret to anyone. China wants to make Taiwan part of China. And it's a stated policy that Taiwan is part of China. So, you know, an invasion is always on the table and something that investors need to be thinking about. So this is a company that makes computer chips that are needed for AI applications. And this is a company that no other company on earth has the same technology, can make the same computer chips that Taiwan semiconductors can. And the companies like Apple, Nvidia, they design their own chips. They don't actually make them. To make them, they need factories with technology that they don't actually have. And in fact, the only company that has these factories with the necessary technology is TSMC, Taiwan Semiconductor Manufacturing. And so it's paid by these companies that design chips to actually manufacture these chips. And they're super advanced factories, often called fabs. And they get paid a lot of money to do so, as you can imagine, since no one else can do what they are doing. Speaking of their monster run, just to put it in perspective, since the April lows that happened after the tariff scare that Trump caused, and very understandably for TSMC, this company was especially impacted by this anxiety, it has rebounded to the tune of In their latest report, their latest earnings report, that is, they beat everything. So they beat top line, bottom line. They beat expectations by a pretty healthy margin. And it does seem like AI demand is just not slowing down in any meaningful way. So looking here in terms of their growth year over year for net revenue, basically popped to forty percent in Q two twenty twenty four. And it's been hovering around that. in terms of growth ever since. This is what is expected in the next quarter. It's not too far below what it reported most recently, but it's slightly lower and who knows what the actual revenue growth ends up being. It may, if this company keeps with tradition, it may beat estimates yet again. Margins remain extremely strong. This speaks to the pricing power that the company has. So we're talking about gross margins that are north of fifty percent, which is very not atypical for manufacturing companies. They typically don't have this generous of a gross margin. And even if you look at their EBIT margin, uh it's very near uh their gross margins so gross margin at fifty six even margin at forty six that's this is what is expected in next quarter if you look at what they reported gross margin at fifty eight ebit margin that is earnings before interest and tax so after the operating expenses Earnings before interest and tax, that's at fifty percent. So this is essentially a money printer. So think of TSMC as a money printer that is based in Taiwan, a legal money printer that is based in Taiwan. And so the question that we started this live with is, is it time to take profits or not? and to do that I like to you know look at what I think the expected cash flows for this company is going to be if you're looking at twenty twenty five or um I should say the next twelve months I'm expecting at least thirty one uh billion in terms of free cash flow mind you uh twenty twenty six forty twenty twenty seven sixty and then I assume an average for the rest of the ten years. So seven more years, I assume a growth rate of twenty percent every year. Now, keep in mind, the average growth rate in the last for the free cash flows in the last three years was closer to seventy percent. So twenty percent is clearly a step down from that. That being said, I think it's reasonable to suspect that this growth will not continue at the same pace. Now, that said, I do expect that this sort of AI cycle, if you will, will last a lot longer than many analysts are giving it credit for. And then after that, to calculate the terminal value of the company, I'm using a perpetual growth rate of three percent, which actually I think may be low. I think traditionally we've used two to three percent for perpetual growth rates. But if the AI revolution actually turns out to be what I think it potentially can be, and we have things like humanoid robots really increasing GDP substantially, this perpetual growth rate, which is meant to match the GDP growth rate, this perpetual growth rate... may actually be closer to five or six percent the discount rate is eleven percent shares outstanding what it is net debt so you calculate that present value of all of these future cash flows present value of the terminal value you don't necessarily need to you know understand this uh if you'd like to then Become an elite member. The course will come out next week. Some of discounted cash flows here is one to ten. And then the discounted terminal value. Add them up. You get the enterprise value. The equity value takes into account the net debt. So in this case, we're subtracting a negative number. So it adds to the equity value divided by the number of shares you get to intrinsic value per share of three or one current price is two forty five. So in summary, no, it's not time to sell. I think that it is very reasonably valued and to how our watch list reflects this take profits price. And if you'd like to see our watch list with all the assets that we follow, our valuations for them, buy below, sell above. If you'd like to follow our portfolios, make sure to become a member. Like I said, if you'd like to get access to the course, then make sure you become an elite member before the course comes out because maybe the price rises afterwards. And a few days to do that. And with that being said, let's take questions. So Mohammed says, Assalamualaikum, Rakan. Is quantum computing... It's going to somehow replace BTC and crypto. Well, I don't think it's going to replace BTC and crypto. Perhaps what will need to happen is that... Sorry, I need to blow my nose. Sorry, what I think will happen is that there will be some upgrade to the cryptography that is used in order to protect the blockchains that current cryptos are built on. So that will happen. This is my prediction. But certainly some upgrades will need to happen if this quantum computing thing actually comes to fruition. Now, that being said, if you look at quantum computing companies, they're pretty thin on revenue and income and pretty fat on promises. So, you know, I've... I remain... you know in a in a wait and see mode I'm still not a believer yet I'd like to see actual practical applications and revenue generation from that it doesn't seem like the safety staff in robotexy is going away anytime soon Which is a good thing. We want people to be safe. Salamat, Lebanon. I see you. Is AMD a good stock for long term? Perhaps I'll take a look at it. But right now, I like our picks, especially in our dividend portfolio. Muhammad says, is there going to be any coupon codes for the membership? To be honest, not anytime soon. Yeah, I have no plans for that anytime soon. But with that being said, congrats. It's Friday. I hope you have a great weekend, inshallah. Leave a like if you enjoyed this live. Become a PIF member if you haven't already. Until next time, make sure to take care of yourself. Thank you, Muhammad. As-salamu alaykum and peace be upon you all.
