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Few stocks are as much of a guaranteed winner from the AI build-out as Taiwan Semiconductor (NYSE: TSM) is. Taiwan Semiconductor is the world’s largest chip foundry by far, and it’s the only one with the technology and expertise to produce the cutting-edge chips needed to power devices like GPUs from Nvidia or smartphones from Apple.
Taiwan Semiconductor is set to cash in, but what could a $5,000 investment now grow to by 2030? I think it could reach $15,000.
Missed AI’s “Act 1”? Act 2 Could Be 14x Bigger.Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout.Continue »
Taiwan Semiconductor has a great outlook
Few companies have the level of visibility into conditions in the tech sector that Taiwan Semiconductor enjoys. Because it makes chips for nearly every company designing AI computing units, it is privy to information regarding expected future demand. That allows Taiwan Semiconductor time to build out the production capacity necessary to meet demand. The company has heavily invested in new chip foundry facilities in Arizona, and has now committed $265 billion to increasing U.S. chip production capacity. That’s not an insignificant investment, and it also helps diversify its chip production away from Taiwan, which is always at risk of military action from mainland China.
Previously, the company gave guidance that its AI chip sales would grow at a compound annual rate in the high 50% range from 2024 through 2029. An analyst asked for an updated figure during its most recent conference call, and while CEO C.C. Wei didn’t offer a specific update, he noted that demand is “very extremely robust,” and that the actual growth rate “doesn’t matter, it probably will be higher.”
That’s a very bullish statement, and with other chip companies already starting to guide for high levels of demand for 2030 to 2031, it could last for much longer.
During Q3, nearly 70% of its business came from high-performance computing, which encompasses its AI products. About 20% of its business comes from smartphones, with the remaining 10% coming from various other industries. Taiwan Semiconductor’s business is most heavily influenced by AI right now, and if that segment’s growth rate stays rapid — as management suggests it will — then the company is in for quite the growth trajectory.
Here’s how Taiwan Semiconductor will turn $5,000 into $15,000
Management’s older long-term forecast for compound annualized growth of 50% now includes several years when its sales of higher-powered computing chips were growing much faster. From here, I think it’s more reasonable to assume that Taiwan Semiconductor as a company can grow at a 35% rate until 2030. For reference, analysts expect 38% growth in 2027.
