Taiwan Semiconductor (TSM) Stock: The Best Stock to Buy and Hold for 5 Years?

Taiwan Semiconductor Manufacturing (TSMC), the world's largest semiconductor foundry, has been a standout performer in recent years. With a market capitalization of over $600 billion and a dominant 62% market share, TSMC has consistently delivered impressive growth and outpaced the broader market. As the demand for AI chips and AI-capable devices surges, TSMC's stock is poised to continue its impressive rally, making it an attractive option for investors seeking long-term growth and stability.
TSMC's impressive rally over the past five years is a testament to its strong fundamentals and market position. The company's stock has shot up an impressive 258% during this period, significantly outperforming the S&P 500 index's comparable gains of 81%. This remarkable performance can be attributed to TSMC's robust growth and its ability to capitalize on the secular growth in the semiconductor market.
The global semiconductor market is expected to grow at a CAGR of almost 11% through 2029, driven by the increasing demand for AI chips and AI-capable devices. Mordor Intelligence estimates that the semiconductor industry's revenue could increase at this rate, generating $1.2 trillion in annual revenue at the end of the forecast period. AI chips, in particular, are forecast to grow at 38% a year in the coming decade, as companies and governments invest billions in training and deploying AI models.
As the world's largest semiconductor foundry, TSMC is well-positioned to capitalize on this growth. The company's impressive growth in recent quarters indicates that it is cornering a bigger share of the semiconductor foundry market. Assuming it can maintain a 60% share of the foundry market in 2030, its annual revenue could hit $142 billion, double its 2023 revenue of $69.4 billion. However, analysts project TSMC's revenue to hit $124.4 billion in 2026, suggesting even faster growth through market share gains. This indicates that TSMC's revenue could increase by 136% over the next five years, driven by its growing market share in the semiconductor foundry market.

Analysts have a strong buy consensus on TSMC stock, with an average target of $222.5, predicting an increase of 10.59% from the current stock price of $201.20. The average analyst rating for TSMC stock from four stock analysts is "Strong Buy," indicating that analysts believe this stock is likely to perform very well in the near future and significantly outperform the market.
TSMC's strategic partnerships with major chip manufacturers like Nvidia, Intel, Qualcomm, and AMD are crucial for securing its market share and driving revenue growth. These partnerships ensure a steady stream of orders, allowing TSMC to maintain its dominant position in the foundry market. With the global semiconductor market expected to grow at a CAGR of almost 11% through 2029, driven by AI and other emerging technologies, TSMC's partnerships will play a significant role in securing its market share and driving revenue growth over the next five years.

In conclusion, Taiwan Semiconductor (TSM) stock is an attractive option for investors seeking long-term growth and stability. With a dominant market share, impressive growth, and a strong buy consensus from analysts, TSMC is well-positioned to capitalize on the growing demand for AI chips and AI-capable devices. As the world's largest semiconductor foundry, TSMC is poised to continue its impressive rally and deliver strong returns for investors over the next five years.