When we think of the artificial intelligence (AI) boom, we might first think of the chip players making the headlines, from Nvidia to Advanced Micro Devices. We know them for the high-powered graphics processing units (GPUs) that fuel critical AI tasks such as the training and inference of models.
But those chips can’t make it to commercialization without another company, and that’s Taiwan Semiconductor Manufacturing (NYSE: TSM). TSMC is the manufacturer that makes most of today’s leading chips, as it holds more than 70% of the global chip foundry market. So while Nvidia, AMD, and others design the chips, TSMC actually brings them from the drawing board to reality.
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All of this has created tremendous growth for TSMC, and the latest earnings report illustrates this. Last week, the company reported record profit for the sixth straight quarter. How does this translate into stock performance? My prediction is that $1,000 invested in TSMC today will be worth this much by 2030…
TSMC’s market leadership
Before we dive into those numbers, though, let’s take a deeper look at TSMC. As mentioned, the company is the global leader in the foundry market, so it produces most of the chips in high demand today. This means that TSMC may benefit from the successes of all of the leading chip players — not just one or two. And this positions the company very well for significant growth as the AI boom continues.
A look at the recent quarter illustrates the picture. In the third quarter, TSMC reported profit and revenue that surpassed analysts’ estimates and forecast fourth-quarter revenue in the range of $52.3 billion and $54.3 billion. At the midpoint, that represents a 58% year-over-year increase.
TSMC’s gross margin has declined slightly, and the company forecasts a decrease of 40 basis points to 66% at the midpoint for the fourth quarter. But it’s important to keep in mind the reason behind that, and it’s linked to growth. TSMC’s ramp-up of its 2 nm technology, or next-generation manufacturing process, initially weighs on margins, and the company is also seeing pressure from the costs of its U.S. fabs. But productivity gains should offset this to a certain degree over time.
Importantly, TSMC chief C.C. Wei emphasized the ongoing strength of the AI market. “Recent developments are very positive to AI’s long-term demand outlook,” he said, noting the increasing adoption of agentic AI and the greater use of open-source AI models.
