TSMC Stock Poised for Long-Term Growth as AI Demand Drives Record Revenue and Global Expansion
TSMC's stock rose nearly 20%, fueled by strong AI chip demand and advanced 3nm technology. With plans for 2nm and 1.6nm nodes, growth and innovation continue.
TSMC Stock Holds Strong AI Growth Potential With $220 Price Target
Taiwan Semiconductor Manufacturing Company (TSMC) has seen its stock climb nearly 20% in the past month. Despite this surge, the outlook remains positive. TSMC stands to benefit from strong AI-driven demand, a near-monopoly in advanced chip manufacturing, geographic expansion, and ongoing technological progress.
Next-Generation Technologies on the Horizon
TSMC is the main supplier of chips for leading AI companies like Nvidia, AMD, Apple, and Qualcomm. Notably, it manufactures Nvidia’s popular Blackwell chip series. Currently, TSMC’s 3nm process is the industry’s most advanced semiconductor technology, offering improved power efficiency and performance.
Looking ahead, TSMC plans to launch 2nm and 1.6nm process nodes in late 2025 and 2026. The 2nm node (N2) is expected to enter volume production in the second half of 2025, offering a 10–15% speed improvement at the same power or 20–30% power savings at equivalent performance. The 1.6nm process will improve power efficiency by an additional 15–20% beyond the 2nm node.
These chip improvements come at a crucial time as data centers face rising energy costs. More power-efficient chips are essential for both technology advancement and cost control. This positions TSMC as a key player in the ongoing semiconductor upgrade cycle.
TSMC projects its AI-related chip revenue to grow at a 45% compound annual growth rate (CAGR) over the next five years, while total revenue is expected to grow at 20% CAGR. This growth potential has caught the attention of major investors, including Ark Investment Management, which recently acquired over 241,000 shares valued at $46.3 million.
Unmatched Market Leadership
TSMC commands a 64.9% share of the global foundry market, far surpassing competitors like Samsung and Intel. Its scale, strong client ties, and technological lead create significant barriers to entry and grant it considerable pricing power. Clients that depend on TSMC are unlikely to switch given the risks of falling behind in AI chip advancements.
Geopolitical risk remains a concern due to TSMC’s location in Taiwan. In response, TSMC has prioritized geographic diversification, investing $65 billion in U.S. fabs and $100 billion globally. Its Arizona facility is fully booked through 2027, and new manufacturing and design centers are being established in Germany and Japan. This strategy reduces tariff exposure and geopolitical risks while building a more balanced global footprint.
Positive Earnings Outlook
TSMC is expected to report Q2 2025 earnings on July 17, with projected EPS of $2.30, a 57.5% year-over-year increase. Revenue is forecasted to grow 13% year-over-year to between $28.4 billion and $29.2 billion, fueled by demand for 3nm and 5nm chips.
April 2025 marked the company’s highest revenue month ever, with net revenues up 48.1% year-over-year to approximately $11.6 billion. For the full fiscal year 2025, TSMC expects sales growth between 24% and 26%, driven by demand for its latest nanochips amid the AI surge.
TSMC trades at an attractive forward price-to-earnings (P/E) ratio of 21x, lower than peers such as AMD (28x) and Nvidia (32x), making it a comparatively undervalued option in the semiconductor sector.
Investment Outlook: Buy, Hold, or Sell?
Wall Street consensus rates TSMC stock as a Strong Buy, with seven Buy ratings, one Hold, and no Sell ratings in the past three months. The average price target is around $219.43, implying roughly 11% upside over the next year.
TSMC: A Strategic AI Investment for the Long Term
The semiconductor industry is growing steadily, driven by AI adoption. TSMC’s unmatched manufacturing capabilities, strong customer relationships, and clear technology roadmap put it in a prime position to benefit. Its investments in next-generation nodes (2nm and 1.6nm) and global manufacturing expansion align with rising AI demand and the broader tech upgrade cycle.
With a reasonable valuation and solid earnings momentum, TSMC offers an attractive entry point for investors seeking exposure to AI sector growth.
