Taiwan's $3 Trillion AI Chip Giant: TSMC Rising

Published Date : 07/06/2025 

Taiwan Semiconductor Manufacturing (TSMC) is poised to triple its market cap in the next five years, driven by the growing demand for AI chips. With a dominant market share and aggressive investments, TSMC is set to capitalize on the AI revolution. 

Taiwan Semiconductor Manufacturing (TSM) is one of the most important players in the global semiconductor industry, fabricating chips for many of the top fabless chipmakers and consumer electronics giants. The Taiwan-based powerhouse holds a dominant 67% share of the global third-party foundry market, while second-place Samsung, which also produces its own chips in-house, has just 11% of the third-party foundry space. TSMC's foundry market share has risen steadily from 58% a couple of years ago to its current position. Looking ahead, the growing demand for artificial intelligence (AI) chips could provide tremendous upside for TSMC, potentially tripling its market cap in the next five years.

TSMC's advanced processing nodes are being used by numerous companies, including Nvidia, Broadcom, Marvell, AMD, and Apple, to fabricate AI-capable chips that go into data centers, personal computers, and smartphones. This places TSMC at the center of the trend of growing AI adoption across multiple end markets. According to one estimate, the global AI chip market could grow at an annualized rate of 35% through 2033 as the technology filters through to more applications. TSMC itself forecasts that its revenue from selling AI accelerators designed by the likes of Nvidia, AMD, Broadcom, and Marvell could register a compound annual growth rate in the mid-40% range over the next five years.

The proliferation of AI in other technologies such as smartphones, PCs, vehicles, and the Internet of Things (IoT) further underscores TSMC's growth potential. For instance, research firm Market.Us forecasts that shipments of generative AI smartphones and PCs are expected to grow at a compound annual rate of 35% through 2029, and the deployment of AI in the automotive industry is expected to grow at a similar rate. TSMC is investing aggressively to upgrade its chip manufacturing and packaging capacity to capitalize on the rising AI-driven demand in the semiconductor market. The company is on track to invest a total of $165 billion in the U.S. alone to build advanced chip fabrication facilities, packaging plants, and a research and development center. In total, TSMC is planning to build 24 new factories across the world, which should help it maintain its dominant position in the foundry market.

TSMC management pointed out last year that its total addressable market (TAM) under the Foundry 2.0 definition stood at $247.5 billion. Foundry 2.0 includes packaging, testing, and assembly, along with other ancillary markets apart from chip manufacturing. Market research firm IDC estimates that the Foundry 2.0 market will grow by 11% in 2025, nearly double its growth rate last year, reaching $298 billion in revenue. TSMC's share of this market is expected to grow to 37% in 2025, up from 28% a year ago. IDC expects the Foundry 2.0 market to grow at a 10% compound annual growth rate through 2029, bringing the market's annual revenue to $436 billion. TSMC could capture a larger share of this market in the next five years due to its aggressive capacity expansion and technological advantages over rival foundries, which allow it to produce faster and more power-efficient chips for its customers.

If we assume that TSMC could increase its Foundry 2.0 share to 60% in five years, its annual revenue could hit $262 billion, almost three times its 2024 revenue. The stock is currently trading at almost 11 times sales. If it trades at a slightly higher sales multiple in five years, it could reach a $3 trillion market cap. The market could easily decide to reward TSMC with a premium valuation, considering that its sales are likely to increase at a faster pace over the next five years than they did over the previous five. 

Frequently Asked Questions (FAQS): 

Q: What is Taiwan Semiconductor Manufacturing (TSMC)?

A: Taiwan Semiconductor Manufacturing (TSMC) is a leading semiconductor foundry based in Taiwan. It fabricates chips for many of the top fabless chipmakers and consumer electronics giants, holding a dominant 67% share of the global third-party foundry market.

Q: How is TSMC positioned in the AI chip market?

A: TSMC's advanced processing nodes are used by companies like Nvidia, Broadcom, Marvell, AMD, and Apple to fabricate AI-capable chips for data centers, personal computers, and smartphones. This positions TSMC at the center of the growing AI adoption trend.

Q: What is TSMC's forecast for AI chip revenue growth?

A: TSMC forecasts that its revenue from selling AI accelerators designed by companies like Nvidia, AMD, Broadcom, and Marvell could grow at a compound annual growth rate in the mid-40% range over the next five years.

Q: What is TSMC's investment strategy for the future?

A: TSMC is investing aggressively to upgrade its chip manufacturing and packaging capacity. It plans to invest a total of $165 billion in the U.S. alone to build advanced chip fabrication facilities, packaging plants, and a research and development center. In total, TSMC is planning to build 24 new factories across the world.

Q: What is the potential market cap of TSMC in five years?

A: If TSMC increases its Foundry 2.0 market share to 60% in five years and trades at a slightly higher sales multiple, its market cap could reach $3 trillion, driven by significant revenue growth and a premium valuation. 

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