Particularly, the growth of AI in the smartphone, PC and data center markets has provided large tailbones to the casting giant's Taiwanese semiconductor manufacturing.
The company's improved share in the vast addressable market and Foundry 2.0 space is likely to cause revenue growth over the next five years.
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Taiwan Semiconductor Manufacturing(NYSE: TSM) It is one of the most important players in the global semiconductor industry. This is because they manufacture chips for many Top Fabless Chipmakers and Conuseer Electronics giants.
The Taiwan-based powerhouse holds a dominant 67% share of the global third-party foundry market. Second place, Samsung (which also produces its own chips in-house) is only 11% of the third-party casting space. Furthermore, TSMC's foundry market share has steadily risen from 58% a few years ago to its current location. Looking ahead, the growing demand for artificial intelligence (AI) chips could offer a huge advantage for TSMC, far exceeding its market capitalization by just over a trillion dollars above its current level.
Certainly, I think TSMC will be able to triple its market capitalization over the next five years.
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TSMC's advanced processing nodes are used by many companies. nvidia, Broadcom, Marvel, AMDand appleWe manufacture AI-enabled chips that can be used in data centers, personal computers, and smartphones. This will solidify TSMC at the heart of the trend of expanding AI adoption across multiple end markets.
According to one estimate, the global AI chip market could record an annual growth of 35% until 2033, as technology gives filters to more applications. TSMC itself predicts that revenue from sales of AI accelerators designed by Nvidia, AMD, Broadcom, Marvell and others will be able to register combined annual growth rates in the 40% medium-term range over the next five years.
With the introduction of a surge in AI in other technologies such as smartphones, PCs, vehicles and the Internet of Things (IoT), it becomes clear that the chipmaker is on track for great growth. For example, according to a forecast from research firm Market.us, the shipments of generated AI smartphones and PCs are expected to grow at a combined annual rate of 35% through 2029, while AI deployment in the automotive industry is expected to grow at a similar rate.
Naturally, TSMC is actively investing in upgrading chip manufacturing and packaging capabilities to maximize the growth in AI-driven demand in the semiconductor market. The company is steadily investing a total of $165 billion in the US alone, building sophisticated chip manufacturing facilities, packaging plants and research and development centers.
Overall, TSMC plans to build 24 new factories around the world. These capabilities investments should also help maintain a dominant height in the foundry market.
Last year, TSMC Management noted that the addressable market (TAM) based on the Foundry 2.0 definition is $247.5 billion. It has been pointed out that Foundry 2.0 also includes packaging, testing, assembly and other subsidized markets other than chip manufacturing.
Market research firm IDC estimates the Foundry 2.0 market will record 11% growth in 2025. TSMC's share in this market is expected to grow to 37% in 2025. This is well above the 28% share that I sat a year ago.
IDC expects the Foundry 2.0 market to record a combined annual growth rate of 10% through 2029. This will bring annual revenues for the Foundry 2.0 market to $436 billion at the end of that period. TSMC will be able to gain a larger share of this market over the next five years due to its aggressive capabilities and the technical advantages it enjoys over its rival Foundries, allowing it to produce faster, more power-efficient chips for its customers.
Assuming TSMC can increase its share of Foundry 2.0 to 60% in five years (it doesn't seem difficult considering the pace of market share increasing), annual revenue could reach $262 billion. This is almost triple the revenues for 2024. The stock is currently trading at almost 11 times more sales.
If they trade with slightly higher sales in five years, they would break the $3 trillion market capitalization. It is also easy to decide to reward TSMC with a premium rating, given that the market is likely to increase sales at a faster pace over the next five years than in the previous five years.
Consider this before purchasing inventory at Taiwan Semiconductor Manufacturing.
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The harsh Chauhan has no position in any of the stock mentioned. Motley Fool has appeared and recommended in semiconductor manufacturing in Advanced Micro Devices, Apple, Nvidia and Taiwan. Motley Fool recommends Broadcom and Marvell Technology. Motley Fools have a disclosure policy.
Prediction: This AI stock is worth $3 trillion over five years.
