To The Moon

Why I Prefer Control to Excitement

Markets have a habit of confusing activity with progress. Every cycle produces its share of dazzling narratives, but very few companies actually control outcomes rather than react to them. My conviction in $Taiwan Semiconductor Manufacturing(TSM)$ and $Palo Alto Networks(PANW)$ comes from that distinction. These are not bets on which technology story wins the news cycle; they are bets on who gets paid regardless of which story wins. One sits at the physical choke point of advanced computing, the other at the operational choke point of enterprise security. Neither is flashy in the way the market currently rewards, which is precisely the point.

Control points dictate outcomes where headlines only chase noise

Taiwan Semiconductor and the Geopolitics of Indispensability

The usual description of Taiwan Semiconductor as a toll booth for global AI demand is accurate, but incomplete. What increasingly matters is not just who uses its fabs, but who cannot afford for them to fail. TSMC’s dominance in leading-edge manufacturing has quietly shifted from being a commercial advantage to a geopolitical one. Western governments are no longer merely customers of the semiconductor supply chain; they are stakeholders in its continuity. That dependency raises the strategic cost of disruption, which paradoxically strengthens TSMC’s moat rather than weakening it.

Financially, the company operates with a level of efficiency that would be impressive even without AI tailwinds. Operating margins above 50 percent and profit margins north of 43 percent reflect not just scale, but near-monopolistic process control at advanced nodes. Revenue growth exceeding 30 percent year on year and earnings growth approaching 40 percent confirm that AI demand is translating cleanly into cash, not evaporating into capital expenditure black holes. Even after heavy reinvestment, free cash flow remains substantial, and the balance sheet retains flexibility, with high liquidity and moderate leverage.

Structural control sustains value despite geopolitical headlines and cyclical volatility

Here is the non-obvious part. TSMC’s capital intensity, often cited as a risk, is becoming a competitive weapon. Building a rival advanced-node foundry now requires not just trillions in capital, but political alignment, customer trust, and a tolerance for multi-year negative returns. That is not a competitive hurdle; it is a deterrent. When scarcity meets long-term capacity agreements, pricing power becomes more stable, and cyclicality fades. In effect, $Taiwan Semiconductor Manufacturing(TSM)$ is slowly morphing from a cyclical manufacturer into something resembling regulated infrastructure, albeit without the regulatory ceiling on returns.

The valuation reflects this shift imperfectly. A trailing multiple in the mid-30s looks demanding until one considers margin durability, earnings visibility, and the forward compression implied by current growth. This is not a speculative multiple; it is the market pricing in structural control and concluding, somewhat reluctantly, that it deserves to be paid for.

Palo Alto Networks and the Economics of Boredom

$Palo Alto Networks(PANW)$ presents a different but complementary case. Cybersecurity used to thrive on fear, complexity, and vendor sprawl. Palo Alto’s strategy has been to make security boring, which is a deeply underappreciated ambition. By consolidating network, cloud, and AI-driven threat detection into a unified platform, it reduces friction for customers and embeds itself into day-to-day operations. Once security becomes infrastructure rather than a collection of tools, it stops being optional and starts being budgeted like electricity.

The financial reflection of ‘boring’ is measurable. Renewal rates are stabilising above 90 percent, average contract lengths are extending, and upsell attach rates on platform modules are improving—clear signals that embedding operations reduces churn and enhances monetisation. While headline earnings growth has been uneven, operating cash flow approaching $4 billion and levered free cash flow above $3 billion tells the real story: the company funds its own evolution and expansion without relying on capital markets, giving it strategic optionality that rivals cannot match.

As security becomes infrastructure, returns compound quietly

Valuation can feel intimidating. A trailing P/E over 100 might scare casual observers, but the correct frame is the economic cost of leaving the ecosystem. Once Palo Alto becomes the operating system for security, switching away is not a procurement decision; it is an organisational risk. That stickiness supports pricing power even as cybersecurity spending growth normalises. A less obvious insight is that as security becomes boring infrastructure, multiples may compress slightly, but cash flow durability strengthens—predictable, recurring revenue becomes the ultimate moat.

Competitive Pressure Without Symmetry

Both markets are competitive, but asymmetry rules. In semiconductors, Samsung and Intel are investing aggressively, but TSMC remains several nodes ahead. Intel’s repeated 18A node delays are more than missed deadlines—they are customers locking in multi-year TSMC commitments because inconsistency at scale is more expensive than premium pricing. In cybersecurity, competitors such as $CrowdStrike Holdings, Inc.(CRWD)$ or Fortinet may excel at niche solutions, but they cannot match Palo Alto’s breadth or enterprise entrenchment. Attempting to replace a unified security platform mid-contract is costly and operationally disruptive, creating switching costs that rivals cannot replicate.

The common thread is that structural control beats tactical manoeuvres. TSMC’s clients cannot dual-source advanced chips without sacrificing timelines or performance, and Palo Alto’s clients cannot unwind a platform without operational pain. These are advantages that are baked into the business model, not temporary market leads.

Cash Flow as Strategic Optionality

For both companies, leadership generates flexibility. TSMC invests when competitors retrench; Palo Alto expands without dilution. Financial strength becomes a competitive moat.

A Conviction Built on Leverage

My case for Taiwan Semiconductor and Palo Alto Networks is not that they are cheap in a simplistic sense. It is that they control leverage points the market consistently underestimates. One processes the world’s most advanced computing demand; the other secures enterprise infrastructure that cannot easily be abandoned. While investors chase the next AI darling or cybersecurity scare, I am content owning the companies that quietly control the levers. Less exciting? Perhaps. Infinitely more durable? Absolutely.

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