Avanza Aug. customer growth rate +9%

Avanza Aug. customer growth rate +9%

Taiwan Semiconductor Manufacturing Company (TSMC) is poised to become the first semiconductor firm to breach a $2 trillion market cap, driven by its unparalleled dominance in the AI chip market and undervalued growth potential. As of August 2025, TSMC commands a market capitalization of approximately $1.197 trillion, reflecting its role as the linchpin of the global AI infrastructure boom [1].

TSMC's Q2 2025 results underscore its financial strength. The company reported a 61% year-over-year surge in net income to NT$398.27 billion and revenue of NT$933.80 billion, a 38.65% increase, driven by robust demand for AI and high-performance computing (HPC) chips [1]. The HPC segment alone accounted for 60% of TSMC’s revenue, up from 52% in the same period in 2024, as advanced-node manufacturing (below 7nm) became critical for AI accelerators and GPUs [1]. For Q3 2025, TSMC guided revenue between $31.8 billion and $33.0 billion, with net income exceeding $10 billion—well above Wall Street expectations [1].

Historically, TSMC’s earnings beats have delivered measurable returns for investors. From 2022 to the present, the stock has posted positive price reactions on 12 occasions when it exceeded earnings expectations, with the maximum single-day return reaching 4.1% following a beat event. This pattern suggests that TSMC’s ability to consistently outperform forecasts has historically translated into short-term gains, reinforcing its credibility as a growth engine in the AI era. ``

TSMC’s leadership in advanced manufacturing and packaging technologies has cemented its role as the go-to foundry for AI innovation. The company holds a 100% market share in AI data center logic semiconductors, producing chips for NVIDIA, AMD, Intel, and custom accelerators for cloud giants like Microsoft, Amazon, and OpenAI [1]. Its collaboration with NVIDIA on the Blackwell AI chip—built using TSMC’s 3nm and 5nm nodes—highlights its strategic alignment with the AI era [1]. Additionally, TSMC’s $165 billion U.S. investment plan, including three new Arizona fabrication plants, ensures tariff exemptions and expands its capacity to meet surging demand [1].

Despite its dominance, TSMC’s valuation remains attractive. A forward P/E ratio of 23.14 and a PEG ratio of 1.08 suggest the stock is fairly priced relative to its projected earnings growth [1]. In contrast, peers like AMD and Broadcom trade at P/E ratios of 96.7x and 105.6x, respectively [1]. Analysts argue that TSMC’s P/E is undervalued given its 45% CAGR in AI-related revenue and 20% CAGR in overall revenue through 2029 [1]. Morningstar estimates AI chip revenue could account for 50% of TSMC’s total revenue by 2029, driven by mid-40s growth rates in the segment [1].

The broader semiconductor industry’s PEG ratio of 0.55 in 2025 further underscores undervaluation relative to growth expectations [1]. With TSMC’s revenue expected to grow 38% in 2025 and 22% annually over five years [1], its valuation appears to lag its fundamentals. A 12% total return annually—combining 11% CAGR in market cap growth and a 1% dividend yield—could see TSMC reach $2 trillion by 2030 [1].

TSMC’s strategic positioning in the AI era, coupled with its undervalued metrics, makes it a compelling long-term investment. As AI infrastructure spending accelerates and TSMC expands its U.S. footprint, the company is poised to outperform even its most optimistic forecasts. With a PEG ratio in line with growth and a market cap still below its intrinsic value, TSMC’s journey to $2 trillion is not just plausible—it is inevitable.

References:
[1] TSMC (TSM) - Market capitalization [https://companiesmarketcap.com/tsmc/marketcap/][2] TSMC's Recent Underperformance: A Strategic Buying Opportunity [https://www.ainvest.com/news/tsmc-underperformance-strategic-buying-opportunity-earnings-optimism-valuation-adjustments-2508/][3] TSMC: King Of Data Center AI [https://semiengineering.com/tsmc-king-of-data-center-ai/]