Taiwan Semiconductor Manufacturing (TSM -3.59%), popularly often called 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 powerful tempo over the previous couple of years.
The world’s main firms, comparable to Nvidia, AMD, Broadcom, Sony, and Apple, faucet TSMC’s vegetation for manufacturing chips that energy private computer systems (PCs), smartphones, knowledge facilities, and gaming consoles, amongst others. In consequence, TSMC is in a stable place to learn from the secular progress of the worldwide semiconductor market, which is predicted to hit $2 trillion in annual income in 2032.
That may be greater than triple the $656 billion in income that the semiconductor trade generated final yr. 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 discount.
Let us take a look at the the explanation why shopping for TSMC appears to be like like a no brainer proper now.
TSMC is making the correct strikes to keep up its dominance
TSMC enjoys an enormous lead within the foundry market with an estimated share of 67%, in line with Counterpoint Analysis. That determine has been heading larger in current quarters. Particularly, TSMC’s foundry market share elevated by six proportion 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 capable of open such an enormous hole over rivals within the foundry market is due to its technological benefit. TSMC’s superior course of nodes enable its prospects to fabricate highly effective and power-efficient chips. For instance, TSMC’s 3-nanometer (nm) node is taken into account to be essentially the most superior chip manufacturing expertise.
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 to be like like Nvidia will faucet TSMC’s 3nm course of node to fabricate its next-generation Rubin graphics processing models (GPUs). Trying forward, TSMC is seeking to push the envelope additional in chip manufacturing expertise with the 2-nanometer course of.
The corporate is predicted to begin mass-producing its 2nm processors within the second half of this yr, which may put it forward of rivals Samsung and Intel. In the meantime, TSMC can be seeking to diversify its world presence. The corporate has pledged an funding of $165 billion within the U.S. to construct superior chip manufacturing amenities that may energy synthetic intelligence (AI) purposes.
It’s price noting that TSMC already fabricates chips for the main AI semiconductor firms comparable to Nvidia, Broadcom, and Marvell, and its concentrate on boosting investments in superior applied sciences ought to enable it to keep up its dominant place within the world foundry market. Moreover, TSMC’s technique of diversifying its world manufacturing footprint in international locations comparable to Japan, the U.S., and Europe may develop into a sensible 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 come back, and that is anticipated to translate into sturdy monetary progress for the corporate.
An enormous addressable market suggests TSMC is constructed for wholesome progress
TSMC completed 2024 with $90 billion in income, an enchancment of 30% from the prior yr. The corporate has acquired off to a stronger begin in 2025, recording a stable 42% leap in income within the first three months of the yr to $25.6 billion. That is higher than what the market was anticipating. Analysts count on TSMC’s progress to achieve momentum because the yr progresses, as evident from the chart under.
TSM Income Estimates for Present Fiscal Yr knowledge by YCharts
What’s extra, the chart above additionally tells us that TSMC is on observe to ship sturdy progress over the following couple of years as effectively. Importantly, it will not be shocking to see the corporate sustaining its stable progress for a for much longer interval in mild of the factors mentioned within the article. The semiconductor market is about to develop at a powerful tempo, and TSMC itself sees a complete addressable market price virtually $250 billion in its foundry and packaging companies.
That determine could possibly be larger sooner or later as the scale of the semiconductor market retains rising. Not surprisingly, TSMC administration expects to keep up an annual income progress charge of 20% for the following 5 years, which ought to translate into sturdy bottom-line progress as effectively. All this makes TSMC a prime semiconductor inventory to purchase proper now as it’s buying and selling at simply 22 instances trailing earnings and 17 instances 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 Units, Apple, Intel, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Idiot recommends Broadcom and Marvell Expertise and recommends the next choices: brief Could 2025 $30 calls on Intel. The Motley Idiot has a disclosure coverage.
