Taiwan Semiconductor Manufacturing (TSM -3.59%), popularly often known as TSMC, is the world’s largest semiconductor foundry, which fabricates chips for the highest shopper electronics firms and chip designers throughout the globe. That explains why it has been rising at a formidable tempo over the previous couple of years.
The world’s main firms, equivalent to Nvidia, AMD, Broadcom, Sony, and Apple, faucet TSMC’s crops for manufacturing chips that energy private computer systems (PCs), smartphones, information facilities, and gaming consoles, amongst others. In consequence, TSMC is in a stable place to profit from the secular development of the worldwide semiconductor market, which is anticipated to hit $2 trillion in annual income in 2032.
That might be greater than triple the $656 billion in income that the semiconductor trade generated final 12 months. Nonetheless, TSMC inventory has been caught within the tariff turmoil of late, which explains why it’s down greater than 20% in 2025 as of this writing. However this pullback has made TSMC a terrific cut price.
Let’s take a look at the explanation why shopping for TSMC appears like a no brainer proper now.
TSMC is making the fitting strikes to take care of its dominance
TSMC enjoys a large lead within the foundry market with an estimated share of 67%, in response to Counterpoint Analysis. That determine has been heading greater in latest quarters. Particularly, TSMC’s foundry market share elevated by six share factors in 2024. In the meantime, second-placed Samsung misplaced floor on this market as its share shrank by three factors to 11%.
A key purpose why TSMC has been in a position to open such an enormous hole over rivals within the foundry market is due to its technological benefit. TSMC’s superior course of nodes permit its prospects to fabricate highly effective and power-efficient chips. For instance, TSMC’s 3-nanometer (nm) node is taken into account to be probably the most superior chip manufacturing know-how.
This course of node is getting used to fabricate smartphone chips and PC processors by the likes of AMD, MediaTek, Apple, and Qualcomm. Now, it appears like Nvidia will faucet TSMC’s 3nm course of node to fabricate its next-generation Rubin graphics processing items (GPUs). Wanting forward, TSMC is trying to push the envelope additional in chip manufacturing know-how with the 2-nanometer course of.
The corporate is anticipated to start out mass-producing its 2nm processors within the second half of this 12 months, which may put it forward of rivals Samsung and Intel. In the meantime, TSMC can also be trying to diversify its international presence. The corporate has pledged an funding of $165 billion within the U.S. to construct superior chip manufacturing services that can energy synthetic intelligence (AI) functions.
It’s value noting that TSMC already fabricates chips for the main AI semiconductor firms equivalent to Nvidia, Broadcom, and Marvell, and its deal with boosting investments in superior applied sciences ought to permit it to take care of its dominant place within the international foundry market. Moreover, TSMC’s technique of diversifying its international manufacturing footprint in international locations equivalent to Japan, the U.S., and Europe may change into a wise transfer in the long term because it may assist it mitigate the challenges arising out of potential trade-related conflicts, such because the one we’re witnessing proper now.
So, it will not be shocking to see TSMC remaining the highest semiconductor foundry for a very long time to return, and that is anticipated to translate into strong monetary development for the corporate.
An enormous addressable market suggests TSMC is constructed for wholesome development
TSMC completed 2024 with $90 billion in income, an enchancment of 30% from the prior 12 months. The corporate has bought off to a stronger begin in 2025, recording a stable 42% soar in income within the first three months of the 12 months to $25.6 billion. That is higher than what the market was anticipating. Analysts count on TSMC’s development to achieve momentum because the 12 months progresses, as evident from the chart beneath.
TSM Income Estimates for Present Fiscal Yr information by YCharts
What’s extra, the chart above additionally tells us that TSMC is on monitor to ship strong development over the subsequent couple of years as effectively. Importantly, it will not be shocking to see the corporate sustaining its stable development for a for much longer interval in mild of the factors mentioned within the article. The semiconductor market is ready to develop at a formidable tempo, and TSMC itself sees a complete addressable market value nearly $250 billion in its foundry and packaging providers.
That determine might be larger sooner or later as the dimensions of the semiconductor market retains rising. Not surprisingly, TSMC administration expects to take care of an annual income development fee of 20% for the subsequent 5 years, which ought to translate into strong bottom-line development as effectively. All this makes TSMC a high semiconductor inventory to purchase proper now as it’s buying and selling at simply 22 occasions trailing earnings and 17 occasions ahead earnings, which is a pleasant low cost to the tech-laden Nasdaq-100 index’s ahead earnings a number of of 27 (utilizing the index as a proxy for tech shares).
Harsh Chauhan has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Superior Micro Gadgets, Apple, Intel, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Idiot recommends Broadcom and Marvell Know-how and recommends the next choices: brief Could 2025 $30 calls on Intel. The Motley Idiot has a disclosure coverage.
