The Nasdaq, which is heavy on growth and tech stocks, saw some pretty steep declines. But, so did other indexes, including the NYSE. For me, this dip represents an opportunity to buy.

So here are some growth stocks on the US index that I’m looking to add to my portfolio. 

Taiwan Semiconductor Manufacturing Co 

The undisputed king of semiconductor manufacturing is trading 7% lower following the June sell-off. While listed on the NYSE, it was clearly impacted by the Nasdaq rout.

Taiwan Semiconductor Manufacturing (NYSE:TSM) is a hugely profitable growth stock and the company registered record revenue in Q1.

It has a price-to-earnings (P/E) ratio of around 19, which is cheaper than the industry average. Investors have likely factored in TSM’s risky and aggressive growth strategy. 

There’s also some geopolitical risk. China has reiterated its desire to bring Taiwan back under the control of the mainland. 

Despite this, TSM is the leading chip manufacturer both in terms of output and technology. 

Li Auto

Li Auto (NASDAQ:LI) shares, like other Chinese EV manufacturers, have done pretty well over the past month. This is largely because of the Chinese economy appearing more open than it did at the beginning of May. But Chinese growth stocks also received a boost after an apparent government U-turn on indigenous soft tech. 

However, there’s a lot of volatility. Shares in Li Auto and peer NIO have jumped up and down over the past two weeks. And this creates opportunity. I want to buy Li Auto for the long run, but I’m watching the share price for an opportunity to buy. 

The firm is on an impressive growth curve. Li Auto revenue for the quarter ending 31 March was $1.5bn, an impressive 307.89% increase year-on-year. 

Lockdowns could hurt production but, in the long run, I think this Chinese manufacturer will prosper. 

CRISPR Therapeutics

CRISPR Therapeutics (NASDAQ:CRSP) has actually done rather well over the past month, but I still think there’ll be a good opportunity to buy amid the current volatility. Investment expert Cathie Wood has actually bought shares multiple times for her Ark Invest (NYSEMKT:ARKK) portfolio. 

It’s definitely a speculative pick as governments and regulators around the world have been hesitant to back gene therapy treatments. However, the technology certainly has plenty of uses. CRISPR Therapeutics plans on submitting its candidate treatment for blood disorders for regulatory approval at the end of this year. 

The gene editing treatment could be used to treat numerous diseases in the future. Scientists have been working to engineer immune cells to seek and destroy cancer cells.

Markets fell over the past few days after US inflation data raised concerns that the US Federal Reserve would increase interest rates significantly.

This was also compounded by weak economic forecasts elsewhere in the world, including the UK and Germany.

Growth and tech stocks were among the hardest hit. But I see this as a good opportunity to buy, especially profit-making growth stocks.

So, here are two stocks I’m looking at for my portfolio.

Taiwan Semiconductor Manufacturing Company

Taiwan Semiconductor Manufacturing (NYSE:TSM) is the world’s largest chipmaker and is technologically some distance ahead of its competitors.

The falling share price comes despite TSMC registering record revenues in the first quarter of 2022. Soaring revenues reflect heightened demand, a backlog in supply of chips, and TSMC’s move to increase prices and shift towards higher margin products.

TSMC has grown in all but one of the last 15 quarters. Revenue has risen from $9.4bn in Q3 of 2019 to $17.1bn in Q1 of 2022. Gross profit has doubled in this period, which rose from $4.5bn in Q3 2019 to $9.5bn in Q1 2022. 

TSMC is down 5% over the past week, but has a forward price-to-earnings ratio of 14.5. I think this represents excellent value for a company that is on such a significant growth curve.

The Taiwanese conglomerate is expecting its sales to grow by 25% to 29% this year. That’s a very attractive forecast. The group is also focusing on its most technologically advanced chips, and these are the ones that deliver higher margins.

One issue is geopolitical. Taiwan and TSMC produce a vast amount of the world’s semiconductors and this week, China reiterated its desire to unite the island nation with the mainland, by force. However, TSMC is diversifying out of Taiwan.

At today’s price, I’ll buy more for my portfolio.

NIO

Moving across the Taiwan Strait to Shanghai, I’m looking at buying more NIO (NYSE:NIO) stock. The EV maker is down nearly 16% over the past five days. That’s a considerable fall, but its not just US inflation data hurting the share price.

China imposed fresh restrictions last week as Covid started spreading again. The Shanghai lockdown in April hit NIO production hard. Investors are clearly worried that further restrictions will impact production.

NIO isn’t profit-making yet. In fact, it doesn’t anticipate making a profit until 2024. However, its revenue generation has been going from strength to strength and I think it’s got an offering that will challenge Tesla‘s superiority.

NIO looks particularly cheap compared to its US competitors when we look at the price-to-sales metric. It has a P/S ratio of 4.4. Tesla has a P/S ratio of 11.8.

I’m also a big fan of NIO’s swappable battery technology. Drivers can change their empty batteries for full batteries in a number of minutes at NIO garages. I think this gives it a huge advantage over its competitors. 

I’ve already bought NIO stock but will buy more at the current price.

Ceres Power

Ceres Power (LSE:CWR) is an early-stage hydrogen technology business. The British fuel cell and electrochemical technology firm has yet to turn a profit, and it could be some time before it does. It’s certainly not cheap by the price-to-sales metric either. The firm has a P/S ratio of around 45, which is pretty high. And that’s definitely one issue for me as a potential buyer.

However, it’s clear that there’s huge potential in hydrogen technology, which is widely forecast to rival electric battery technology to power cars in the future. Fuel cells wouldn’t only be used in cars, but everything from powering homes to supporting massive cloud data centres.

Its top-selling product is SteelCell, a highly efficient, fuel agnostic, and scalable fuel cell made from widely available materials. It also has lucrative partnerships with Bosch and Doosan Fuel Cell.

NIO

NIO (NASDAQ:NIO) is my top electric vehicle (EV) stock pick. The firm is not yet profitable, and it’s not expecting to be for two years, but it has a really impressive offer in the sector and has demonstrated impressive revenue growth. It trades with a P/S ratio of four, which is considerably less than other EV manufacturers.

One thing I particularly like about NIO is its swappable battery technology. Drivers can pull up at a garage and exchange their near-empty battery for a full one in a matter of minutes. I think this gives it a huge advantage over its competitors. Especially compared to Tesla, which trades with very high multiples.

While Covid-19 restrictions were relaxed in China today, there’s definitely concern that this Chinese EV maker could see its growth hampered by future lockdowns. China’s Covid-zero policy is likely to damage NIO’s production and, if sustained, could hamper economic growth and demand for its high-end vehicles.

Taiwan Semiconductor Manufacturing 

Taiwan Semiconductor Manufacturing (NYSE:TSM) is a giant of the semiconductor world and stands to benefit from the EV revolution. The Hsinchu-based company is the world’s largest manufacturer of semiconductors by market share and has lofty plans for future growth. Moreover, it’s still growing. The firm expects sales to rise 25-29% in 2022.

It’s currently trading with a price-to-earnings ratio of around 20, which isn’t overly cheap. However, this is a growth stock and its valuation is partially based on future earnings potential. Analysts are predicting considerable growth over the next five years.

There is geopolitical risk for the Taiwanese firm amid increasing Chinese assertiveness. However, TSM also operates foundries outside of the island nation. In 2021, TSMC announced a $100bn expansion plan for the next few years. The firm wants to stay at the forefront of the industry, but such a huge investment can be risky.

I’ve already bought NIO and TSM, and I’m looking to buy Ceres Power.

Qualcomm

Qualcomm creates semiconductor software and is a leading producer of application processors, integrated GPUs, and baseband modems for mobile devices. The San Diego firm has a massive portfolio of wireless patents, giving it a cut of millions of smartphones sold worldwide.

It’s one of the biggest players in the supply of mobile system on chips (SoCs). According to Counterpoint Research, its market share rose 7% year-on-year to 30% by the end of 2021. Part of the growth was down to the company’s capacity to navigate the global chip shortage. The firm decided to multi-source key products from its vendors, enabling it to avoid bottlenecks. It also prioritised higher-end Snapdragon SoCs that have better margins.  

The stock has performed better than the index over the last five years, and is up around 150% despite a recent slide. There’s concern that a global slowdown in the purchase of mobile phones could reduce growth prospects for this one. But Qualcomm is also diversifying its portfolio with new chips for Internet of Things (IoT) devices, servers and connected cars.

The share price has been on a downward trend over the last three months and it has a lower price-to-earnings ratio than its peers. I’m looking to add this stock to my portfolio.

Taiwan Semiconductor Manufacturing

Taiwan Semiconductor Manufacturing is the world’s largest manufacturer of semiconductors by market share and has benefited from the current demand for chips. On April 14, the company said its net revenue for the latest quarter had grown by 35.5% year-on-year to $17.6bn, driven by its HPC and automotive market demand.

In 2021, TSMC generated $56.8bn in revenue with 41% operating margins. This translates to $23.3bn in operating income. The firm could be delivering $46.8bn in operating income in 2026 if revenue can grow at 15% a year as management is predicting. The Hsinchu-based company estimates revenue will actually grow between 15% and 20% until 2026. Reports today suggest it will ship over $17bn worth of chips to Apple in 2022, that’s a gain of 23% from 2021.

The firm is also well positioned to benefit from the current shortage of semiconductors. Taiwan is known as a hub for the manufacture of these important components and much of this is due to TSMC. It accounted for a whopping 54% of total foundry revenue globally in 2020, according to TrendForce data.

Some analysts are waiting for the point at which supply outstrips demand for chips. But, while I’m here for the long run, BMW’s CEO recently said he foresaw the shortages continuing through to 2023.

For me, there is some concern that geopolitical changes, including a more assertive China, could impact TSMC’s operations. Equally, any global economic slowdown could see supply outpace demand quicker than expected.

TSMC has a very dominant position in the market and should benefit from economies of scale. I already own Taiwan Semiconductor Manufacturing stock and am looking to buy more.

Strong product demand

Semiconductors are critical components that power electronics from computers and smartphones to a whole host of tech that is now standard in cars. Taiwan is known as a hub for the manufacturer of semiconductors and much of this is due to TSMC. It accounted for a whopping 54% of total foundry revenue globally in 2020, according to TrendForce data.

The company sells its products to dozens of household names in sectors from computing to cars. And right now, demand for semiconductors is at an all-time high. The current shortage is impacting many industries. Recent attempts to buy a new car really hammered this home for me. And on Monday, BMW CEO Oliver Zipse said that he believes the shortage will continue to plague carmakers for two more years.

As the world’s largest contract chip manufacturer, TSMC stands to benefit. The company has forecast a huge 25%-29% increase in sales for 2022.

Performance data

On Friday after the stock market closed, TSMC highlighted how the firm is benefiting from the current operating environment. It said it had set a new quarterly high for sales in January to March, beating its own projections. TSMC recorded sales of US$16.99bn in the first quarter, up 12% from a quarter earlier and also up 35.5% from the same period a year earlier. The data proved even better than the company had forecast. The results came despite Q1 generally being a slow period for the industry.

The company also made the most of higher product prices due to the global shortage of semiconductors. TSMC will hold an investors conference on Thursday to give guidance for the second quarter.

Expansion planning

In 2021, TSMC announced a $100bn expansion plan for the next few years. The plan aims to see company maintain its place as the number one producer of semiconductors and increase its capacity in manufacturing the most advanced 5-nanometer chips. Capital spending is expected to rise to around $40bn-$44bn in 2022 from $30bn in 2020.

The company’s ambitious growth plans may concern shareholders as some analysts pointed to future market oversupply. But TSMC is confident that any correction and oversupply in the market would be short-lived and that the company’s technological primacy would see it less impacted than other firms. And in the long term, I think TSMC will prosper as silicon content in tech gadgets and electric cars drive greater demand.

There is some concern about how geopolitical changes, including a more assertive China, could impact TSMC’s operations. That remains a risk.

TSMC closed on Friday at under $100 a share. This is the cheapest the Taiwan-based firm has been all year.

I’ve recently bought this stock, as I think TSMC will continue to report record gains in the current market and will benefit from industry trends into the future.

Taiwan Semiconductors

TSMC was founded in Taiwan in 1984 and has been one of the leading suppliers of semiconductors ever since.

What are semiconductors? Well, they’re the main pieces of hardware that make computing possible. I won’t get into the details as they are far too complex for me to even understand, let alone write about. Suffice it to say that without semiconductors, you can’t make computers.

Given the ubiquity of computing devices, the TSMC share price has been on a steady rise since it first went public in 2006. It currently trades at ten times its initial cost.

Semiconductor shortage

The pandemic has caused a lot of problems for the world, but one which you may not have noticed was a worldwide shortage in semiconductors.

Semiconductors are difficult to manufacture and must be made under the strictest lab conditions. Even a single unwanted molecule can render a batch unfit for use. The entire process is incredibly expensive, sometimes taking years and requiring millions, even billions of dollars’ worth of specialized equipment and labour. 

Any disruption in the supply chain can set the whole process back by months and with economies on lockdown, it was nearly impossible to find the workforce needed to mine and extract the key minerals used in production. 

But demand for semiconductors has remained high throughout the pandemic and TSMC actually increased its revenue in 2020 by 50%. You can see this in the TSMC share price history. The company took a small hit at the start of the pandemic, but its share price then went on to almost double.

Even with reduced capacity, TSMC told investors that it expected to make $15.7bn in revenue in Q4 of this year. Production still remains stretched but the company is taking steps to meet demand, namely opening a new factory in Japan.

Japan factory and share price

While I was initially surprised by the decision to open a new factory in Japan, I have come to see the sense of it, and the subsequent jump in the TSMC share price.

This could be seen as a hedge against a more aggressive China. President Xi has recently talked openly about ‘reunifying’ Taiwan with the mainland. That could be behind TSMC’s decision to establish a base in another country.

However, I think the share price action has more to do with the choice by TSMC to reinvest its profits. Many companies, such as Shell or Apple, choose to use profits in expensive stock buybacks. Buybacks benefit shareholders in the short term, but prevent the company from expanding and adapting.

Reinvesting is the kind of action that benefits a company long term and opening a new factory shows TSMC’s commitment to the future.

Conclusion

Will I add TSMC shares to my portfolio? Yes, I think so.

I’ll be watching its price over the next few weeks in case there is a large sell-off, but I feel confident that TSMC is making the kind of decisions I want from a company I invest in.

TSMC financial update

This week TSMC released an update reporting that its revenue for January through April rose 16% year-on-year.

This hasn’t had much impact on the share price overall. Last year, the TSMC share price soared, but it has only risen 1% year-to date. It’s also now down 20% from its 52-week-high. It has a price-to-earnings ratio of 30 and dividend yield of 1.5%.

TSMC is a serious heavyweight in the semiconductor market, with a market cap of $551bn. Its main competitors are Samsung, with a $480bn market cap, Intel which is worth around $222bn, and Qualcomm at $144bn.

TSMC counts Apple as a partner and is helping to create its micro-OLED displays for use in wearable augmented reality devices.

The company expects its capital expenditure (capex) for the next three years to come in around $100bn. It will spend this on land, factories, and equipment. Its capex cost for 2020 was $17.4bn, so this projection is a considerable jump. I find this reassuring as it tells me the company is ploughing money into solidifying its position and growing.

TSMC ended Q1 with cash and marketable securities of $28bn, while its debt level is under $10bn. This gives it a considerable free cash flow balance.

Risks to shareholders

Chip shortages are expected to continue for some time, possibly up to 18 months. This could put pressure on the TSMC share price, so volatility is to be expected.

There’s also mounting pain in the global tech sector as financial markets pull back. The Taiwan stock exchange was down 6% last night compounded by virus worries. TSMC has a dual-listing in Taiwan and New York.

Then there’s also geopolitical pressure coming from the US and China. The US is looking to bring semiconductor manufacturing home, as are China and Europe. Meanwhile, additional political tensions rage on between Taiwan and China.

There’s no doubt this rising domestic pressure will raise the likelihood of increased competition. Soaring demand is already encouraging other companies to up their chip manufacturing efforts. Samsung has said it’s spending $116bn on its next-generation chip business, and Intel is investing $20bn.

Nevertheless, while Taiwan would prefer to keep its chip manufacturing domestic, TSMC is beginning to venture further afield. It has plans to build a state-of-the-art wafer fabrication plant in Arizona and intends to install new production lines at its existing facility in Nanjing, China, to produce chips for car makers.

I think the global chip shortage has shown us how vital a component chips are in so much of our tech. The arrival of 5G will further compound that. For that reason, I’d happily add shares of TSMC to my Stocks and Shares ISA because it’s a clear leader in the space and I think it’s got a long growth opportunity ahead.

I do currently have access to this stock through my holding in the Fidelity Asian Special Situations fund, of which TSMC has an 8.9% weighting.