Day: September 28, 2024

Taiwan Semiconductor Manufacturing (NYSE: TSM), popularly known as TSMC, is the world’s largest semiconductor foundry that manufactures chips for fabless semiconductor companies. Its customers include popular names such as Nvidia, Apple, Advanced Micro Devices, Broadcom, Qualcomm, and others.

TSMC controls 62% of the global foundry market, enjoying a significant lead over second-place Samsung, which has a market share of just 13%. So, TSMC is in a solid position to make the most of the secular long-term growth opportunity in the semiconductor market, which is getting a nice boost thanks to a new catalyst in the form of artificial intelligence (AI) that’s positively impacting multiple end markets.

The semiconductor market’s growth potential is encouraging TSMC to boost capital spending

The global semiconductor market’s revenue is expected to cross $1.3 trillion in 2032, up from $547 billion last year. This explains why TSMC is set to spend a lot on enhancing its manufacturing footprint. The company’s board recently approved a $30 billion investment plan to install and upgrade advanced chip manufacturing facilities, construct new fabs, and also shore up its advanced packaging and specialty chip manufacturing abilities.

It is worth noting that TSMC spent a similar amount of money in 2023 on capital expenditure. However, it won’t be surprising to see TSMC gradually increasing its capex levels. The company intends to spend between $30 billion and $32 billion on capital expenditure in 2024 as compared to its earlier estimate of $28 billion to $30 billion. Analysts are expecting its capital expenses to land at the higher end of that range.

More importantly, analysts expect the higher end of TSMC’s capex to hit $37 billion in 2025. On the other hand, The Wall Street Journal recently reported that TSMC and Samsung are considering a $100 billion investment to build huge chipmaking facilities in the Middle East as a part of their global expansion strategy. So, there is a good chance that the spending on semiconductor manufacturing equipment could lead to higher capex by the likes of TSMC and Samsung.

The potential jump in TSMC’s capex suggests that the company will spend more to buy chipmaking equipment, especially high-end equipment so that it can meet the demand for chips made on advanced manufacturing processes such as 3-nanometer (nm) and 2nm nodes.

For instance, the production capacity of TSMC’s 3nm process node is currently full thanks to demand from the likes of Intel and Apple. Meanwhile, Apple is reportedly looking to secure all of TSMC’s 2nm manufacturing capacity for its 2025 iPhones. All of this bodes well for a key TSMC supplier that is vital to its production of these advanced chips — ASML Holding (NASDAQ: ASML).

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ASML Holding’s growth is set to accelerate

Dutch semiconductor equipment giant ASML has a monopoly in the market for extreme ultraviolet (EUV) lithography machines that are used for making advanced chips based on small process nodes such as 5nm and 3nm. Not surprisingly, chipmakers such as Samsung, TSMC, and Intel have been lining up to buy ASML’s advanced machines so that they can manufacture faster and more power-efficient chips.

This resulted in ASML reporting a massive order backlog of 39 billion euros, which is higher than the company’s 2024 revenue forecast of 27.5 billion euros. Oddly, ASML expects its revenue to remain flat in 2024 when compared to 2023, but the recent developments concerning the semiconductor industry’s capex suggest that better times lie ahead for the company.

As per consensus estimates, ASML’s revenue in 2024 could rise by 5% to $30.9 billion. However, the forecasts for the next couple of years have been rising and point toward a nice acceleration in its growth.

That won’t be surprising considering the huge sums of money that TSMC and other chipmakers are planning to spend to shore up their production capacities. It is worth noting that ASML got 29% of its revenue from customers based in Taiwan last year, indicating that TSMC is most probably a big customer for the Dutch company.

Investors should also note that South Korean customers accounted for 25% of ASML’s net sales in 2023. So, Samsung’s rumored spending splurge in the Middle East, as mentioned earlier, could be a catalyst for ASML. Additionally, South Korean memory manufacturer SK Hynix is also reportedly in line to purchase ASML’s advanced chipmaking equipment.

All this explains why the market for EUV lithography machines is expected to touch $50 billion by 2039 as compared to $8 billion in 2022. ASML, therefore, could see terrific incremental revenue growth over the next five years as chipmakers pour more money into its offerings to make advanced chips.

That’s why now would be a good time for investors to buy ASML stock as it is trading at 28 times forward earnings, a discount to its five-year average forward earnings multiple of 35 and also to the U.S. technology sector’s earnings ratio of 45. The stock may have underperformed the broader market this year with gains of just 7%, but it could break out of this mediocrity thanks to a bump in capital spending by chipmakers such as TSMC and others.

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1 Top Tech Stock to Buy Hand Over Fist Before TSMC’s Spending Splurge Begins was originally published by The Motley Fool

Fueling up for less is one of the ways people save money at Costco (even if it occasionally means waiting in a line of cars to do so). On average, Costco gas is less expensive than area competitors.

What keeps this perk so exclusive, however, is that you’re required to scan your membership card at the pump. This can be your physical card or a digital card through the Costco app.

Either way, no card, no gas. This is where the scam starts.

Oh, no, I forgot my membership card!

“Darn it, my phone died and I can’t scan my membership card. Can you scan your membership for me so I can fuel up and go charge my phone?”

The request could seem innocent enough. We’ve all had our phones die at the wrong moment or forgotten our wallets without realizing it until we’re at the register. Unfortunately, extending a kind gesture could get you into a bit of hot water if the person on the receiving end is up to no good — such as trying to milk every potential dollar out of stolen credit cards.

(According to online lore, the core of this scam is that Costco doesn’t require ZIP codes to use a credit card, unlike other gas stations. It also helps muddy the waters, since the police have an easy line right to you.)

Your purchases are tied to your account

Part of scanning your card for access means that each time you fuel up at a Costco gas station, that purchase is tied to your Costco account. This includes information about the payment method you use.

Stolen credit cards get reported, and then authorities track down the purchases made. If your Costco account is tied to purchases made from a stolen credit card, you’ll likely have some serious explaining to do.

At best, you get charged for the stolen gas and the cops don’t show up. At worst, you’re having to prove you didn’t steal the credit card in the first place. But even if you wind up with the best-case scenario here, you still have to admit to Costco that you broke the terms of your membership agreement.

Costco can (and does) close accounts for breaking rules

The Costco membership rules are very clear about not letting other people use your membership card. Moreover, Costco has been very vocally cracking down on membership sharing over the last year.

If you’re caught sharing your membership — and yes, scanning your card that one time for that one person counts — Costco can, and likely will, close your account and cancel your membership.

Costco has every right to prohibit you from ever joining again, too. And then you’d never have another Costco hot dog.

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How to properly share your membership

Costco’s rules are pretty strict, but there are still a few ways you can share the Costco love with your friends and family.

1. If you’re the Primary Member (or Account Manager), you can assign one free membership card to a member of your household.

2. Each cardholder can bring up to two guests to the store on a trip. However, only the member can make purchases.

3. Members can purchase Costco Shop cards, which are gift cards for Costco. A Shop card gives non-members entrance into Costco and the ability to shop, but they’ll need to use the Shop card to pay.

What to do if you’re approached at the pump

Never scan your membership card for someone else to make a purchase. Instead, you can advise the struggling person to contact the station attendant.

If the person is really a member and having an actual issue, the attendant can help them. If the person isn’t a member, they’ll likely scurry away.

It’s great to want to help our neighbors, but let’s not forget common sense, too. Fueling up at Costco is rarely life or death, so the person can head home for their card or head to another gas station. You don’t need to put your membership at risk.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Brittney Myers has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

Buy Gas at Costco? Watch Out for This Scam was originally published by The Motley Fool