Motley Fool Money: Taiwan Semi’s $100 Billion Plan and Housing is Hot!

Episode Release Date: July 10, 2025

Hosts: Dylan Lewis, Ricky Mulvey, and Mary Long

Introduction

In this episode of Motley Fool Money, hosts Tyler Crowe and analyst Matt Frankel delve into significant developments in the semiconductor and housing markets. The discussion navigates through Taiwan Semiconductor Manufacturing Company's (TSMC) robust earnings and ambitious AI investment plans, the resurgence of the housing market amidst declining mortgage rates, and notable mergers and acquisitions in the building supply and snacking industries.

Taiwan Semiconductor's $100 Billion AI Investment

Earnings Surge and AI Demand

The episode kicks off with a focus on TSMC's impressive second-quarter earnings. TSMC reported a remarkable 39% revenue growth, driven primarily by surging demand for AI chips.

Tyler Crowe highlights the magnitude of TSMC's commitment:

“[TSMC] has pledged to spend $100 billion ramping up manufacturing.”
(00:30)

Matt Frankel provides historical context, noting that while TSMC has experienced strong revenue growth over the past 30 years—averaging 18% annually—the current 40% year-over-year growth rate is an accelerated surge fueled by AI investments:

“I think over the past 30 years Taiwan Semi's revenue has grown at about an 18% annualized rate... it’s really picked up in the past couple years because of all this AI spending.”
(01:43)

Sustainability of AI CapEx Spending

The hosts explore whether AI-related capital expenditure (CapEx) can sustain this growth. Matt suggests that while 40% growth is substantial, it may be maintainable over the next five years given the ongoing investments by major tech companies like Apple, Nvidia, AMD, Broadcom, and Tesla:

“If you're asking over like the next five years, I could see that growth rate actually being sustained.”
(01:43)

Tyler adds that the construction industry's increasing backlogs for AI data centers serve as a positive leading indicator for continued chip demand:

“Their remaining performance obligations... have been growing at similar rates, which is also to me like a leading indicator for a lot of this.”
(02:52)

Investment Recommendation

Discussing TSMC's stock, Matt affirms its strong position despite a seemingly high valuation:

“Given how quickly its revenue is growing, it trades for about 24 times forward earnings. There’s not a lot to dislike about this company.”
(04:26)

Tyler concurs, emphasizing that growth projections make TSMC an attractive buy:

“It's hard to see it being an awful investment from here at current valuations.”
(04:41)

Housing Market Revival Amid Declining Mortgage Rates

Mortgage Rate Trends and Housing Activity

Transitioning to the housing sector, Tyler notes a positive trend: the average 30-year mortgage rate has declined to 6.77%, marking five consecutive weeks of decreases. While not as low as the sub-3% rates seen in 2021, this drop from over 7% earlier in the year is encouraging.

Matthew Frankel observes that unlike previous rate declines, the current environment boasts increased housing inventory, which has spurred purchasing activity:

“All the other times it's happened, there hasn’t been a lot of housing inventory. Now that’s kind of changed.”
(07:07)

Key statistics highlighted include:

• 9% week-over-week increase in mortgage application volume.
• 56% year-over-year increase in refinancing.
• 25% year-over-year rise in purchase applications on a seasonally adjusted basis.

Impact on the Housing and Home Improvement Industries

The hosts discuss how the decline in mortgage rates is revitalizing the housing market, leading to increased refinancing and home purchases. This surge is also benefiting the home repair and remodel sectors, with companies like Home Depot and Top Build positioned to capitalize on the renewed demand.

Tyler Crowe emphasizes the pent-up demand for home projects, suggesting that lower mortgage rates provide homeowners the opportunity to undertake renovations:

“Everyone's starting to get that itch again. And with lower mortgage rates, a refinancing is a good opportunity to that.”
(08:26)

Mergers and Acquisitions in Building Supplies and Snacking Industries

Top Build's Acquisition of Progressive Roofing

The conversation shifts to Top Build, an insulation distribution and installation contractor, which has announced its acquisition of Progressive Roofing for $810 million in cash. This move is seen as a strategic expansion into the commercial roofing sector.

Matt Frankel breaks down the deal:

“Progressive Roofing... makes about 70% of their money from re-roofing... The deal is $810 million in cash... about nine times Progressive’s EBITDA.”
(12:46)

Despite the strategic fit, Tyler expresses initial apprehension about the diversification:

“Roofing isn't insulation. And honestly, I'm a little anxious when a company makes an acquisition that is slightly like tangential to what they're doing.”
(14:26)

However, Matt reassures that roofing and insulation are related facets of the building process, suggesting potential synergies and cost savings:

“Insulation and roofing are related parts of the business building process... whenever you acquire two businesses that have some overlap.”
(15:26)

Ferrero's Acquisition of W.K. Kellogg

Shifting to the snacking aisle, Tyler discusses Ferrero International's agreement to acquire W.K. Kellogg for an enterprise value of $3.1 billion, representing a 31% premium over Kellogg’s closing price.

Matt Frankel analyzes the strategic motivations:

“Ferrero has been building out its US Portfolio... they have a lot of brands that are very well known to Americans.”
(18:21)

He further explains that the acquisition aligns with broader industry trends toward product diversification and catering to healthier consumer preferences:

“The definite trend is to not only diversify your product portfolio, but diversify it in a way toward healthier products.”
(19:35)

Tyler Crowe adds that while the packaged food industry faces challenges like high cocoa prices and stagnant growth, iconic brands like Pepsi and Coca-Cola continue to adapt effectively:

“I honestly think Pepsi and Coca Cola are the two standouts in the industry still.”
(20:26)

Upcoming Earnings and Final Thoughts

As the episode wraps up, the hosts preview upcoming earnings reports. Matt Frankel points to the banking sector as a critical area to watch, given its broader economic implications:

“Banks are the obvious answer just because they’re reporting first... there's a lot you can tell from bank earnings.”
(20:47)

Tyler Crowe adds personal interest in monitoring Home Depot’s earnings to assess the translation of refinancing activity into increased demand:

“I really want to dive into the earnings transcript and see if some of this activity that we just talked about with Refi is translating into increased demand.”
(21:20)

Conclusion

This episode of Motley Fool Money offers a comprehensive analysis of TSMC's strategic investments in AI, the optimistic turn in the housing market driven by falling mortgage rates, and significant M&A activities reshaping the building supplies and snacking industries. With expert insights from Matt Frankel, listeners gain a nuanced understanding of these dynamic sectors and their investment implications.

For more detailed discussions and stock recommendations, tune into future episodes of Motley Fool Money.