Taiwan Semiconductor Manufacturing Company (TSMC) is a key player in the global semiconductor industry, producing chips for leading fabless companies and major consumer electronics brands.
TSMC commands a substantial 67% of the global third-party foundry market, far outpacing second-place Samsung, which holds just 11%.
Over the past few years, TSMC’s foundry market share has steadily increased from 58%. With the rising demand for artificial intelligence (AI) chips, TSMC is well-positioned for significant growth, potentially pushing its market cap beyond its current value of just over $1 trillion.
Growth Potential in AI Chips
TSMC’s cutting-edge processing technology is utilized by industry giants like Nvidia, Broadcom, Marvell, AMD, and Apple to manufacture AI-capable chips for data centers, PCs, and smartphones. This positions TSMC at the forefront of the expanding AI market.
Estimates suggest the global AI chip market could grow at an annualized rate of 35% through 2033 as AI technology becomes more widespread. TSMC projects that revenue from AI accelerators designed by companies like Nvidia and AMD could see a compound annual growth rate in the mid-40s over the next five years.
The integration of AI into various sectors, including smartphones, PCs, and vehicles, indicates that TSMC is on track for sustained growth.
For example, a forecast from Market Research predicts that shipments of generative AI smartphones and PCs in the U.S. will increase at a compound annual growth rate of 35% through 2029, with similar growth expected in the automotive sector.
To capitalize on this rising demand, TSMC is making substantial investments to enhance its manufacturing capacity. The company plans to invest $165 billion in the U.S. to establish advanced fabrication facilities, packaging plants, and R&D centers, with a total of 24 new factories set to be built worldwide.
Stock Potential
Last year, TSMC management highlighted that its total addressable market (TAM) under the Foundry 2.0 framework stands at $247.5 billion. This includes not only chip manufacturing but also packaging, testing, and assembly.
Market research firm IDC estimates that the Foundry 2.0 market will grow by 11% in 2025, nearly doubling last year’s growth rate, reaching $298 billion in revenue.
TSMC’s share of this market is expected to rise to 37% by 2025, up from 28% a year ago. IDC forecasts a 10% compound annual growth rate for the Foundry 2.0 market through 2029, potentially bringing annual revenue to $436 billion.
With aggressive capacity expansion and technological advantages over competing foundries, TSMC could capture an even larger share of this market in the next five years.
If TSMC increases its Foundry 2.0 share to 60%, its annual revenue could reach $262 billion—almost three times its projected 2024 revenue. Currently, the stock trades at nearly 11 times sales.
If TSMC maintains a slightly higher sales multiple in five years, it could achieve a market cap of $3 trillion. The market may reward TSMC with a premium valuation, as its sales are expected to grow at a faster pace than in the previous five years.
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