Top-tier Tech Company Stands Out as Leading AI Chip Stock to Invest in at Present
TSMC, the world's leading semiconductor manufacturer, is set to experience a surge in revenue and earnings over the next five years, driven primarily by the secular growth opportunity presented by Artificial Intelligence (AI).
In the current quarter, TSMC is expecting a 38% spike in revenue, and the company has raised its full-year revenue growth estimate from mid-20% to 30% for 2025. This growth is reflected in TSMC's impressive Q2 results, where revenue increased by 44% year-over-year to $30.1 billion, and adjusted earnings per share increased by 61%.
The forward earnings multiple of TSMC is 24, indicating continued bottom-line growth. TSMC's stock is trading at 28 times trailing earnings, a discount to the broader technology sector, despite quarter after quarter of outstanding execution. The stock has jumped an impressive 59% in the past three months.
Key factors supporting this growth include full-capacity operations of TSMC’s new U.S. and German factories by 2029, expanding manufacturing capability aligned with rising AI chip demand. The expiration of TSMC’s cross-licensing agreement with GlobalFoundries in 2029 is expected to double revenues from that stream.
Advancements into quantum computing and neuromorphic AI chips, tapping into next-generation AI applications, also contribute to TSMC's growth. AI chips are expected to account for a significant portion of full-year revenue, reflecting soaring global demand for processors powering AI workloads.
The broad semiconductor market is expanding due to AI, with the foundry market growing and intense investments in AI chip manufacturing capacity industry-wide. According to McKinsey, the investment in AI chips and computing hardware could exceed $3 trillion by 2030.
TSMC controls 68% of the global semiconductor foundry market, leaving its closest rival, Samsung, with a market share of less than 8%. This market dominance positions TSMC well to capitalise on the AI-driven growth.
Earnings per share (EPS) are expected to increase from about $9.52 in 2025 to $22.14 by 2030, representing more than a doubling in five years. Correspondingly, the stock price is forecasted to rise from around $228 in 2025 to nearly $398 by 2030, a gain of approximately 65% from current levels.
In summary, TSMC is poised for strong revenue and earnings growth over the next five years, fueled mainly by its dominant position in manufacturing advanced AI chips and expansion of manufacturing capacity globally. This secular AI growth opportunity is expected to approximately double EPS and substantially increase stock value by 2030. The various AI-focused end-markets that TSMC serves are projected to grow remarkably in the next five years, further bolstering TSMC's growth prospects.
- TSMC's growth prospects are not only fuelled by the secular growth opportunity presented by Artificial Intelligence (AI), but also by the company's investments in next-generation AI applications such as quantum computing and neuromorphic AI chips.
- With the broad semiconductor market expanding due to AI, and the foundry market growing, TSMC's focus on manufacturing advanced AI chips and expansion of manufacturing capacity globally positions the company to capitalize on the artificial-intelligence-driven growth, with earnings per share (EPS) expected to double by 2030. The advancement in technology, such as AI chips, is a significant factor driving TSMC's revenue and stock value in the finance sector.
