On today’s segment of Good Buy or Goodbye, Yahoo Finance’s Julie Hyman is joined by Pence Capital Management Chief Investment Officer Dryden Pence, to discuss navigating stock picks within the semiconductor sector. Pence shares his perspectives on why investors should consider adding Taiwan Semiconductor Manufacturing Co. (TSM) to their portfolios while avoiding Intel (INTC).
Pence identifies Taiwan Semiconductor Manufacturing Co. as a buy, highlighting the company’s position in the world of artificial intelligence (AI). He explains that Taiwan Semi produces "really high-value" chips, making it an "absolute chokepoint" in the industry. Pence goes so far as to dub the company the "most important" player in this space, as he believes "no one is able to accomplish their long-term mission" without relying on Taiwan Semi’s capabilities. This, in turn, grants the company pricing power and the potential for "long-term excess earnings." Additionally, Pence emphasizes Taiwan Semi’s technological superiority over its competitors, describing the company as an "essential building block" in the future of AI.
In contrast, Pence recommends that investors steer clear of Intel. He notes that the legacy business has "lost its mojo," and with a lack of meaningful innovation efforts Intel’s once-dominant Foundry business, which accounted for 61% of the market, "has fallen dramatically." With competitors now "years ahead" in terms of innovation, "supply chains so tight" and demand surging, Pence explains companies are hesitant to "disrupt something that’s working," resulting in a decline in Intel’s market share.
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