Silent Giant TSMC Returns to the Peak of its Powers as the AI Boom Continues
AI and U.S. growth stocks have rebounded to record highs after their slump in February and March, rewarding those who bought the dip, especially in the IT and AI sectors. At the heart of this resurgence is Taiwan Semiconductor Manufacturing (TSM), better known as simply 'TSMC', the silent powerhouse behind the AI boom. The stock is within grasp of yet another historic high around the $225 mark.
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TSMC produces the chips that drive everything from Nvidia's GPUs to Apple's iPhones, and it's now experiencing accelerated growth fueled by surging AI demand, global factory expansion, and massive capital investment. Despite its strong rebound and concerns about exuberant valuations, TSMC still appears attractively priced. Given how sharply TSM has bounced back, the stock could become the ultimate Tech play, with its best days still ahead.
AI's Engine Room: TSMC's Chip Dominance
Many tech giants are currently riding the AI wave, but when it comes to TSMC, it's more appropriate to say that the company is steering it. As the world's largest contract chipmaker, it produces the advanced processors that Nvidia, AMD (AMD), and Apple (AAPL) rely on to bring AI to life. In TSMC's latest earnings call in April, CEO C.C. Wei revealed that AI chip revenue, which tripled in 2024, is expected to double again this year.
This is currently a major tailwind for TSMC, driving a 41.6% year-over-year revenue surge. Specifically, advanced 3nm and 5nm chips, critical for AI's heavy lifting, made up 73% of wafer sales. With cloud giants like Microsoft (MSFT) and Amazon (AMZN) building AI data centers at breakneck speed, the company's factories are running at full capacity, with no signs that demand is slowing down anytime soon.
Going Global: TSMC's Strategic Power Move
In the meantime, with AI entering the sphere of national security, TSMC has been incentivized to not keep its magic in Taiwan. It's spreading its wings to secure its AI dominance and sidestep geopolitical risks. The company is investing $165 billion in U.S. factories, with Arizona's first fab already fully booked by heavyweights like Nvidia and Qualcomm (QCOM). Here's how all these giants stack up on TipRanks' stock comparison tool:
Moreover, in Europe, a new $10 billion plant in Dresden, Germany, and a chip design center in Munich are positioning TSMC to capture the continent's growing AI market. Beyond the motive of diversifying supply chain and hedging geopolitical risk, TSMC has managed to secure long-term, high-value contracts with global tech titans through these moves, as they, in turn, can make such commitments with notably less risk involved.
Wei emphasized that these expansions will cement TSMC's leadership for decades, even as U.S. trade policies loom as a potential headwind. By building closer to its customers, TSMC ensures its chips remain the go-to for AI innovation.
Betting Big: Capex Fuels the AI Future
TSMC is doubling down on AI with an aggressive capital expenditure plan of $38–$42 billion for this year, up from $29.8 billion in 2024. Over 70% of that spending is allocated to next-generation 3nm and 2nm chip production, set to launch later this year, which will deliver the performance needed to stay well ahead in the AI race. Realistically, few competitors are even operating at TSMC's level.
This investment reflects a broader trend, as tech giants invest billions in AI infrastructure. TSMC sits at the center of this transformation, converting that capital into the cutting-edge chips driving AI's next evolution. As CEO C.C. Wei put it, 'AI demand is insatiable,' and TSMC is positioning itself to meet it, powering years of potential growth.
TSMC Valuation Defies Expectations
Here's where the investment case gets compelling: despite TSMC's explosive growth, the stock remains attractively valued. With Wall Street projecting a 33% jump in EPS this year, TSMC trades at a forward P/E of just 22. For a cyclical chipmaker, that might seem high, but TSMC isn't a typical semiconductor company.
The AI boom is a multi-year tailwind, driving sustained top and bottom-line growth. With over 60% global foundry market share and ongoing global expansion, TSMC's scale and strategic positioning make that valuation look like a bargain—even if EPS growth slows in future years.
Is TSMC Stock a Buy, Sell, or Hold?
Wall Street appears strongly bullish on TSMC's prospects, further emboldening the stock's recent rebound alongside most other high-growth tech stocks. TSMC stock carries a Strong Buy consensus rating, with seven analysts currently bullish and one neutral. TSMC's average stock price target of $223 indicates a modest 5% upside potential over the coming twelve months, amid a broader long-term trend that is expected to deliver amiable returns for several years to come.
The AI Bet You Can't Overlook
Calling TSMC just a chipmaker misses the bigger picture—it's the backbone of the AI era. With AI demand soaring, global fabs in development, and billions in capex reinforcing its dominance, TSMC's growth story is far from over.
Trading at a forward P/E of ~26, the stock offers a rare opportunity to own a high-growth industry leader at a reasonable valuation. Yes, geopolitical risks remain, but TSMC's strategic positioning keeps it ahead of the curve. For investors looking to ride the AI wave, TSM may be one of the shrewdest long-term bets available.
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