Taiwan Semiconductor Manufacturing (TSMC) has experienced a remarkable rally in its share prices over the past five years, outperforming the S&P 500 index by a significant margin. With a 258% increase in share prices during this period, TSMC has emerged as a lucrative investment option. Looking ahead, the company is poised to benefit from stronger catalysts in the semiconductor industry, particularly the rise of artificial intelligence (AI) technology.
The global semiconductor market, valued at $469 billion in 2018, witnessed a compound annual growth rate (CAGR) of 2.3% over the past five years. However, the next five years are expected to bring brighter prospects, with the emergence of AI driving increased chip spending across various industries. Mordor Intelligence estimates that the semiconductor industry’s revenue could grow at a CAGR of nearly 11% through 2029, reaching $1.2 trillion annually.
AI’s influence is already evident in the market, with the demand for AI chips projected to grow at a rate of 38% per year over the next decade. Additionally, AI-related boosts are expected in the sales of smartphones, PCs, and generative AI smartphones. These factors bode well for TSMC, as the company holds a dominant market share of 62% in the semiconductor foundry industry, catering to major players such as Nvidia, Intel, Qualcomm, and Advanced Micro Devices.
TSMC’s recent financial performance indicates a growing market share in the semiconductor foundry sector. In the second quarter of 2024, the company reported a 33% year-over-year increase in revenue, amounting to $20.8 billion. Analysts predict a further 25% revenue growth in 2024, reaching $86.4 billion. This growth trajectory positions TSMC to outpace the overall semiconductor market this year, which is projected to grow by 13%.
With the semiconductor foundry market expected to reach $236 billion by 2030, TSMC has the potential to sustain its solid growth over the next five years. Assuming a 60% market share in 2030, the company’s annual revenue could reach $142 billion, doubling its 2023 revenue of $69.4 billion. Analysts’ revenue projections for 2026 suggest that TSMC could achieve even stronger growth by gaining a larger share of the foundry market.
Based on these projections, TSMC’s revenue could increase by 136% over the next five years, surpassing the 102% growth achieved from 2018 to 2023. The market is likely to reward TSMC stock for this potential acceleration in growth, making it a favorable long-term investment option.