TSMC Breaks $1 Trillion Barrier as AI Demand Fuels Unprecedented Growth

As of last week, Taiwan Semiconductor Manufacturing Company (TSMC) saw its stock fall by 2.12%, with a weekly increase of 4.34% and a year-to-date rise of 22.62%. With a market capitalization of ¥12.468 trillion, TSMC has recently achieved a significant milestone by surpassing a market value of $1 trillion, becoming the first Asian stock to do so since PetroChina's brief achievement in 2007. This noteworthy achievement follows TSMC's recent earnings announcement, where it surprised markets with an upward revision of its full-year revenue growth forecast, driven by the burgeoning demand for artificial intelligence (AI) computing power.

Amid robust AI chip demand, TSMC reported a 61% surge in Q2 net profit. The company now expects its dollar-denominated sales to grow by around 30% by 2025, up from the previous prediction of "close to the mid-20s." This adjustment is attributed to a surge in advanced process AI chip orders, emphasizing confidence in sustained demand through 2026. TSMC is actively expanding its backend capacity for CoWoS advanced packaging, crucial for NVIDIA's AI GPUs.

Despite geopolitical tensions and potential tariffs facing the industry, TSMC remains optimistic regarding its AI chip prospects. The company's five-year (2024-29) revenue compound annual growth rate (CAGR) is anticipated to remain at approximately 20%, with AI-related revenues forecasted to experience a 45% CAGR. This projection aligns with their previous outlook, suggesting little perceived impact from international trade policies.

Foreign investors prefer holding TSMC's American Depositary Receipts (ADRs), given regulatory hurdles in converting Taiwan shares to U.S. stocks. Closing at $245.40 last Friday, TSMC's ADRs now have a market cap of approximately $1.2 trillion, and with continued upward momentum, the stock could potentially rank among the top nine companies globally by market cap.

TSMC maintains its leadership as a critical chip supplier for giants like Apple and NVIDIA. Both their Taiwan stock and U.S. ADRs reflect market confidence in the company's capability to underpin the AI era's infrastructure. With 30% year-on-year projected revenue growth for 2025, TSMC underscores investors' belief in the escalating global AI competition's benefits. The company enjoys high demand for its 3nm and 5nm process AI chips, bolstered by orders from major tech firms such as Amazon, Google, and Microsoft.

Despite fierce competition from Samsung and Intel, TSMC's prowess in maintaining high yields in advanced node production leaves it well-positioned to continue its market leadership in the advent of AI technology. The company's ongoing investments in cutting-edge processes like their CoWoS technology cater to high-performance computing requirements, thereby reinforcing its role as a leading force in semiconductor manufacturing.

As it braces for geopolitical and macroeconomic challenges, TSMC is methodically cautious in capital expenditures while striving to capture AI chip market opportunities. With an assertive growth trajectory and a commitment to advancing technologies, TSMC is poised to maintain, if not bolster, its stature as a dominant semiconductor foundry worldwide.