A Closer Look at Taiwan Semiconductor: The New Trillion-Dollar AI Chip Stock

Taiwan Semiconductor Manufacturing Company (TSMC) has recently joined the ranks of corporations with a market capitalization exceeding $1 trillion. In just 2024, TSMC's stock surged by an impressive 90%, effectively raising its market value from approximately $500 billion to over $1 trillion.

Today, only ten publicly traded companies worldwide can boast a market cap over $1 trillion, with TSMC being one of the newest and most significant entries in this exclusive club.

Growth Statistics and Financial Performance

To understand TSMC's remarkable rise, it's essential to look at its recent financial performance. Below is an overview of TSMC’s annual growth metrics for both revenue and earnings across the last four quarters:

Metric	Q1 2024	Q2 2024	Q3 2024	Q4 2024
Year-over-Year Revenue Growth	16.5%	40.1%	39.0%	38.8%
Earnings Per Share Growth (YOY)	8.9%	36.3%	54.2%	57.0%

This data showcases that TSMC has accelerated its revenue growth considerably over the last year. A critical aspect to note is the expansion of the company’s gross margin, which has significantly contributed to the rise in its earnings.

As a leading producer of semiconductor chips, TSMC is positioned well to benefit from industry trends, particularly in the realm of artificial intelligence (AI). Major tech companies like Microsoft, Alphabet, Amazon, and Oracle are planning to invest billions in AI infrastructure, which will rely heavily on TSMC’s foundry services.

Valuation Insights and Future Potential

Many investors may feel they've missed the opportunity with TSMC after its sensational 90% increase in value this year. With the stock price currently around $223, it might appear that TSMC is approaching its peak. However, important factors suggest otherwise.

The forward price-to-earnings (P/E) ratio for TSMC stands at about 25. While this reflects a higher stock price, it is still relatively aligned with the S&P 500 average of 24. TSMC is an anomaly among large businesses, demonstrating robust growth in both revenue and earnings simultaneously. Notably, the increased earnings growth is surpassing the rise in sales, indicating solid management efficiency and profitability.

The current upswing in TSMC's valuation is seen as a correction, considering the company was previously trading at a lower multiple compared to its peers in the semiconductor industry. The long-term growth drivers, particularly from the AI sector, indicate that TSMC could continue to thrive in the coming years.

Given its current market position and growth trajectory, investors looking for growth opportunities should consider TSMC as a valuable addition to their portfolios.

Stock, Growth, Investment