Taiwan Semiconductor: A Trillion-Dollar AI Chip Stock Worth Buying

Taiwan Semiconductor has recently joined the elite trillion-dollar club following a remarkable surge in its stock price, which soared by 90% in 2024. This incredible growth has catapulted the company’s market capitalization from approximately $500 billion to over $1 trillion.

With only ten public companies globally achieving this milestone, Taiwan Semiconductor Manufacturing (TSMC) has quickly made its mark. Despite this significant gain in valuation over the past year, there are compelling reasons to consider that TSMC shares may still be undervalued.

Understanding TSMC's Financial Performance

Recent quarterly financial data demonstrates TSMC's impressive growth trajectory:

Metric	Q1 2024	Q2 2024	Q3 2024	Q4 2024
Revenue growth (YOY)	16.5%	40.1%	39.0%	38.8%
Earnings per share growth (YOY)	8.9%	36.3%	54.2%	57.0%

This financial profile reveals a swift increase in revenue along with a significant expansion in gross margins, which has boosted earnings as well. Such impressive numbers support the rationale behind the soaring stock prices.

In addition to its strong current performance, TSMC's long-term growth potential appears bright. Major tech companies like Microsoft, Alphabet, Amazon, and Oracle are allocating billions to AI infrastructure, which will rely on TSMC's advanced chip production capabilities.

TSMC: An Underrated AI Investment

Many investors might feel they’ve missed the opportunity to invest in TSMC given its recent rise. The stock currently trades around $223, nearing its all-time high, leading some to believe it may be overvalued. However, despite this growth, TSMC's forward price-to-earnings (P/E) ratio stands at 25, which is only slightly above the S&P 500's average of 24.

This discrepancy is quite notable; TSMC is not just maintaining its size but is also enhancing both its revenue and earnings growth rates. The company's earnings are rising faster than its sales, indicating a strong operational efficiency and profitability.

As such, the increase in TSMC’s valuation is justified, especially since it had previously been trading at a discount compared to peers in the semiconductor sector. With ongoing tailwinds in the AI industry, TSMC is positioned for robust and sustained growth in coming years.

For these reasons, investors should actively consider TSMC as a viable addition to their portfolios, potentially capitalizing on its considerable long-term growth opportunities. This trillion-dollar tech giant warrants attention, as it may still represent a bargain in today’s vibrant market.

Taiwan, Semiconductor, AI